Minimum Billionaire Tax? EU Agency Calls For World To Crack The Whip On Ultra Wealthy

The 2024 Global Tax Evasion Report released by the EU Tax Observatory recommends a 2% tax on the wealth of the world’s billionaires. This is one of the six recommendations that the agency stated to reconcile globalization with tax justice.

Over the last 10 years, governments across the globe have launched various initiatives to reduce tax evasion. For example, an automatic system for multilateral exchange of bank information has been in force since 2017 and has been applied by over 100 countries as of 2023.

An international agreement on a global minimum tax of 15% on multinational corporations has been in force since 2021 and has been endorsed by more than 140 countries. There remains, however, little awareness on the effect of these policies.

Six Key Observations

The EU agency’s report has laid out its six key observations with regard to the dynamic of international tax evasion and tax competition over the study period. The report highlights:

• There has been a decline in offshore tax evasion by a factor of about three in the last 10 years, thanks to automatic exchange of bank information
• The shifting of large amounts of profits to tax havens continues to persist; $1 trillion in 2022
• The global minimum tax has been dramatically weakened by corporate loopholes
• The newly emerging forms of tax competition are affecting government revenues
• Billionaires, globally, are benefitting from very low effective tax rates
• A minimum wealth tax of 2% on billionaires globally, could generate nearly $250 billion

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Six Key Recommendations

The EU agency also has put forth six recommendations to reconcile globalization with tax justice. These include:

• Reform the international agreement on minimum corporate taxation to implement a rate of 25% and remove the loophole in it that foster tax competition.
• Introduce a new global minimum tax for the world's billionaires equal to 2% of their wealth.
• Institute mechanisms to tax wealthy people who have been long-term residents in a country and choose to move to a low-tax country.
• Implement unilateral measures to collect some of the tax deficits of multinational companies and billionaires in case global agreements on these issues fail.
• Move towards the creation of a Global Asset Registry to better fight tax evasion.
• Strengthen the application of economic substance and anti-abuse rules.

The successful implementation of the 15% global minimum corporate tax rate serves as precedence that implementing a 2% tax on billionaire wealth is also a possibility. Research indicates that global billionaires currently have a very low personal effective tax rate, of between 0% (France) and 0.5% (U.S.) of their wealth.

In many countries, billionaires have been using the personal-wealth holding companies route to evade taxes. A billionaire tax of 2% could address this evasion and generate close to $250 billion from less than 3,000 individuals, the agency said.

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