Finance ministers from the Group of 20 major economies declared they will seek ways to ensure the wealthiest people pay their fair share of taxes.
What's new: The-G20, a forum of the world's biggest economies for developing global policies on pressing challenges, agree the super-rich are finding too many ways to skirt their responsibilities to collective government spending. The forum's consensus statement on Friday – a ministerial declaration on international tax cooperation and geopolitical issues – promotes collective action but does not specify a global tax.
What's next: “With full respect to tax sovereignty, we will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed,” the G-20 declaration said after meeting in Rio de Janeiro for two days. Brazil, as host of the talks, proposed a 2% minimum tax on billionaires that will be taken up at the G-20 Leaders' Summit also scheduled to be held in Rio on November 18 and 19.
Brazilian Finance Minister Fernando Haddad called the declaration a “significant step forward" that exceeded his expectations: “What has been initiated today is a broader process that will require the participation of academia, scholars and international organizations with experience in the subject, such as the OECD and the U.N."
What's important: The world's richest 1% have gained as much as US$42 trillion in new wealth in the past decade, nearly 34 times more than the entire bottom half of the world’s population, according to an Oxfam analysis released ahead of the ministers' meeting in Rio. That breaks down to almost US$400,000 per person in the top 1% compared to US$335 per person in the bottom half. Imposing a 2% minimum tax rate would raise about US$250 billion a year from 3,000 ultra wealthy people that could be put toward improved public services.
Who's involved: The Brazilian G-20 presidency this year, with the backing of South Africa, Spain and France, is championing the measure to rein in what Oxfam describes as "extreme levels of inequality" and ensure the rich pay their fair share.
The G-20 includes 19 countries plus the European Union. Together they represent 80% of global economic output. The members are: Argentina, Australia, Brazil, Britain, Canada, China, the E.U., France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States.
“At the top of the pyramid, tax systems stop being progressive and become regressive. The super-rich pay proportionally much less tax than the working class,” said Brazil’s President Luiz Inácio Lula da Silva. “Some individuals control more resources than entire countries. Others have their own space programs."
What's happening now: Oxfam says 80% of the world's billionaires live in G-20 countries; globally, however, billionaires pay a tax rate of less than 0.5% on their wealth.
“Inequality has reached obscene levels, and until now governments have failed to protect people and planet from its catastrophic effects,” said Max Lawson, Oxfam International’s head of inequality policy. “The richest one percent of humanity continues to fill their pockets while the rest are left to scrap for crumbs.”
