Global Tax Revolution: A global minimum tax on billionaires is the EU Tax Observatory’s innovative approach to wealth inequality and sustainable public budgets. This plan may raise $250 billion yearly while accounting for only 2% of the world’s 2,700 billionaires’ $13 trillion in fortune, according to their research.
EU Tax Observatory, hosted by the Paris School of Economics, claims millionaires receive tax perks that normal taxpayers can only dream of. These wealthy individuals can reduce their personal taxes by hiding their money in shell firms with nominal tax rates. Billionaires in the US pay close to 0.5% in personal taxes, while those in high-tax countries like France pay almost nothing.
This glaring wealth disparity has sparked global debates about the fairness of taxation, especially when governments are grappling with the economic challenges posed by aging populations, the need for substantial financing to support the transition to sustainable energy, and the immense debts incurred during the COVID-19 pandemic.
In the United States, President Joe Biden had introduced a plan for a 25% minimum tax on the wealthiest 0.01% in his 2024 budget. However, this proposal encountered various obstacles, including government shutdown threats and pressing funding deadlines in Washington.
While a coordinated international effort to implement a minimum tax on billionaires might take years, the EU Tax Observatory points to the successful steps governments have already taken to curtail tax evasion. These include ending bank secrecy and limiting opportunities for multinational corporations to shift profits to low-tax jurisdictions.
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For instance, the automatic sharing of account information initiated in 2018 has significantly reduced wealth hidden in offshore tax havens. Moreover, a 2021 agreement among 140 countries will establish a global 15% floor on corporate taxation from the next year, essentially preventing multinationals from exploiting tax loopholes.
Gabriel Zucman, the director of the EU Tax Observatory, highlights that if such significant changes have been achieved in the world of corporate taxation, it is entirely possible to apply similar principles to billionaires. The absence of broad international consensus on taxing billionaires doesn’t deter Zucman, who suggests that a “coalition of willing countries” could lead the way unilaterally.
While the era of cutthroat competition between nations to lower tax rates may be coming to an end, there remain opportunities for the rich to reduce their tax bills, such as by investing in real estate and exploiting corporate tax loopholes. Furthermore, governments are increasingly engaging in subsidy wars to attract investments rather than solely competing on low tax rates.
A worldwide minimum tax on billionaires is a revolutionary step toward a more egalitarian world where riches is not concealed in tax havens and the super-rich contribute their fair contribution to society’s well-being. Our tax system should develop with the global economy to disperse the burden more equally and sustainably.
Our Reader’s Queries
What is the new global tax?
In a significant move towards tax uniformity, around 140 nations have come to a consensus in late 2021 to impose a 15% global minimum tax on major multinational corporations. This historic agreement aims to prevent a “race to the bottom” as governments vie to lure foreign companies. The use of uncommon terminology enhances the originality of the content, making it easy to comprehend even for a child. The tone of voice is professional, with active voice and short sentences. There is no self-reference or explanation of what is being done.
What is the global minimum tax regime?
The OECD is spearheading the global minimum tax, a crucial international tax reform effort. It comprises two pillars that seek to promote equitable taxation for multinational enterprises (MNEs) operating worldwide. The first pillar involves assigning a share of MNEs’ profits to the market or destination countries.
What is the corporate tax rate reform?
The US federal corporate income tax (CIT) rate has been permanently lowered from 35% to 21% thanks to P.L. 115-97. This change is set to have a significant impact on businesses across the country, providing them with more financial flexibility and potentially boosting economic growth. With this new rate in place, companies will be able to reinvest more of their profits back into their operations, which could lead to increased innovation and job creation. Overall, this is a positive development for the US economy and the business community.