Real solutions to the crises fuelling the far right needs demand public investment. The super-rich must pay their share.
The super-rich go shopping: the annual Monaco Yacht Show
(Drozdin Vladimir / shutterstock.com)
MAGDALENA SEPÚLVEDA
Europe, Latin America and the United States especially have become more polarised. This was evident in the recent European Parliament elections, where the rise of the far right unsettled the political environment in countries such as France and Germany. To counter this existential threat to social peace, governments must invest in quality public services, such as education, health and infrastructure, that make a real difference to people’s lives.
Today’s most significant dilemma for democracy is thus how to raise revenue. The answer is simple: go after the money where it is, in the hands of big multinationals and super-rich individuals who are experts at hiding it to avoid paying their fair share of taxes.
The good news is that the idea of a global minimum tax on the ultra-rich is gaining momentum. This is not only the right thing to do but also the most popular, recent polls show. A survey of 22,000 citizens in the world’s largest economies by the Earth4All initiative revealed an overwhelming majority (68 per cent) of G20 respondents supportive of higher taxes on the wealthy to finance significant economic and lifestyle changes.
MAGDALENA SEPÚLVEDA
9th July 2024
Europe, Latin America and the United States especially have become more polarised. This was evident in the recent European Parliament elections, where the rise of the far right unsettled the political environment in countries such as France and Germany. To counter this existential threat to social peace, governments must invest in quality public services, such as education, health and infrastructure, that make a real difference to people’s lives.
Today’s most significant dilemma for democracy is thus how to raise revenue. The answer is simple: go after the money where it is, in the hands of big multinationals and super-rich individuals who are experts at hiding it to avoid paying their fair share of taxes.
The good news is that the idea of a global minimum tax on the ultra-rich is gaining momentum. This is not only the right thing to do but also the most popular, recent polls show. A survey of 22,000 citizens in the world’s largest economies by the Earth4All initiative revealed an overwhelming majority (68 per cent) of G20 respondents supportive of higher taxes on the wealthy to finance significant economic and lifestyle changes.
Another poll, commissioned by Patriotic Millionaires, an organisation of high-net-worth Americans, interviewed 800 adults whose assets—not counting their homes—were each worth over $1 million. Over 60 per cent viewed expanding inequality as a threat to democracy and 62 per cent supported an international standard for taxing the super-rich.
Brazilian proposal
Evidently, the current international system is widely perceived as outdated and unfair, encouraging high avoidance and evasion of tax by the powerful. The recent proposal by the Brazilian presidency of the G20 to negotiate a global standard of at least 2 per cent tax on the world’s super-rich, comprising approximately 3,000 individuals, has refocused attention on the issue.
In this vein, Gabriel Zucman, a colleague on the Independent Commission for the Reform of International Corporate Taxation, last month published a report mandated by the Brazilian G20 leadership. ‘A blueprint for a coordinated minimum tax on ultra-high-net-worth individuals’, released ahead of the G20 finance ministers’ summit later this month, addresses the implementation of such a tax, which is also supported by Spain, France and South Africa, among others.
Even the more select G7 summit in Italy last month supported working with Brazil to advance international co-operation on this matter. ‘We will continue to work constructively with the Brazilian G20 Presidency to advance international cooperation. We will work to increase our efforts aimed at progressive and fair taxation of individuals,’ the G7 leaders declared.
Tax convention
Already a decade ago, scandals revealed by whistleblowers, such as the Panama Papers, ‘Luxleaks’ and the Pandora Papers, opened the eyes of citizens around the world and led the Organisation for Economic Co-operation and Development to launch a reform process, which culminated in a ‘two-pillar solution’ on corporate taxation. This stipulated that very large multinationals should pay taxes in all the places where they operated (pillar one) and that there should be a minimum, 15 per cent global corporate-tax rate (pillar two).
While this helped move the issue forward, the outcome was far from beneficial for developing countries. Disillusioned by the results and the manoeuvres of the advanced economies, majority-world countries decided to take the discussion to the United Nations.
Last November, at the request of the countries of the African Union (AU), the UN General Assembly adopted, by a large majority, a resolution to launch negotiations on a framework convention on tax co-operation. An ad hoc intergovernmental committee will draw up the terms of reference for this new body by next month.
Negotiations are progressing in Latin America. The winds in favour of regional fiscal co-ordination have led to a Regional Latin American and Caribbean Platform for Tax Cooperation (PTLAC), which Chile is chairing this year.
Mobilising resources
If this trend of growing tax co-operation continues, developing countries could have the resources they need to invest in public services and tackle global challenges such as the climate emergency (May this year was the warmest on record and the 12th consecutive month of record-high temperatures for the planet). These phenomena need to be addressed urgently with investment in public services.
Unfortunately, decades of privatisation and commercialisation have weakened the capacity of public services and exacerbated inequalities. We need to reverse this trend by increasing domestic resource mobilisation through tax co-operation, as advocated by Brazil at the G20 and the AU at the UN.
This may be the only hope for emerging economies, burdened by unsustainable debt and uncontrolled inflation, to secure the resources needed to meet societal demands. By taxing multinationals and the super-rich fairly, we can generate much-needed revenue. This will not only promote social cohesion but also provide us with the tools to overcome the threats to our democracies.
Quality public services are the bedrock of any functioning society and our primary tool for tackling global challenges and driving meaningful change. Investing in them can provide society with an effective antidote to the real threats of extremism and populism, safeguarding our future.
Magdalena Sepúlveda
Magdalena Sepúlveda is executive director of the Global Initiative for Economic, Social and Cultural Rights and a member of the Independent Commission on International Corporate Tax Reform. From 2008 to 2014 she was United Nations rapporteur on extreme poverty and human rights.
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