Small Tax on Super-Rich Could Yield Billions for Caucasus, Central Asia

By Eurasianet - Aug 28, 2024,

• A proposed wealth tax on the top 0.5% of earners globally could raise over $2 trillion, with significant implications for Caucasus and Central Asia.
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• The tax revenue could be used to address pressing social and economic challenges, particularly those related to climate change.
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• Wealthier nations like Kazakhstan could generate billions in additional revenue, while even the poorest countries stand to gain millions.
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A recent study published by an advocacy group finds that imposing a modest tax on top earners can generate hundreds of millions of dollars in much needed revenue for countries in the Caucasus and Central Asia. The added revenue could go a long way in addressing social and economic challenges connected with global warming and climate change, the study adds.

The working paper, titled Taxing extreme wealth: What countries around the world could gain from progressive wealth taxes, contends that a comparatively small tax paid by the top 0.5 percent of income earners in every country around the globe could collectively raise more than $2 trillion. The paper, published by the UK-based Tax Justice Network (TJN), uses the example of Spain’s wealth tax as the basis for its global model of super-rich taxation.

“Global challenges, in particular the climate crisis, inequality, and the cost-of-living crisis come along with substantial financial needs,” the report states. “A moderate, progressive wealth tax could help countries to raise these urgently needed funds. The proposed tax would seek a reasonable contribution from the top 0.5 percent wealthiest individuals in each country, who, on average, possess more than 25 per cent of a society’s total wealth.”

Under the TJN plan, the super-rich in every nation would pay taxes on assets above a pre-determined threshold, calculated on a sliding scale ranging from 1.7 percent to 3.5 percent. The plan sets a high net-worth threshold to ensure that the middle class is not punished by the tax. 

According to the working paper’s estimates, wealthier states of the Caucasus and Central Asia could raise hundreds of millions of dollars in added revenue. In Kazakhstan, the richest state in the two regions, over 61,000 citizens would be eligible to pay the wealth tax. The minimum asset threshold for those facing the tax in Kazakhstan would be $819,381. TJN’s estimate, adjusted for existing taxes and other factors, indicates that its proposed wealth tax could generate an additional $3.7 billion in revenue for the Kazakh government. Those funds could have come in handy to speed recovery efforts for areas of Kazakhstan that were devastated by flooding this spring. Residents of at least one hard-hit area staged protests in May over what they contended was inadequate government assistance.

Elsewhere, the introduction of the TJN plan could generate roughly $695 million in added revenue for the Uzbek government, which has been running up big deficits of late as it strives to retool the country’s economy. Under the TJN formula, the Caucasus’ richest state, Azerbaijan, could add more than $241 million to its state coffers. The poorest nation in the two regions, Tajikistan, could generate about $54 million.

The working paper makes an argument that the super-rich should feel a moral obligation to help defray the consequences of global warming. “The wealthiest citizens bear more responsibility for carbon emissions, both due to their more excessive consumption, as well as to their investment habits,” the report states.

TJN does not outline an action plan to secure international adoption of its super-rich taxation proposal. For the proposal to work, the introduction of stringent international transparency rules would be needed, the report acknowledges, urging the creation of a Global Assets Registry. The chances that any such mechanism will come into being in the foreseeable future seem slim to none. 

“Existing tax systems offer opportunities for the super-rich to engage in international tax abuse, primarily through the use of secrecy jurisdictions to shield their fortunes,” the report states. “Therefore, the implementation of a moderate, progressive wealth tax must be accompanied by a move towards full beneficial ownership transparency for all types of companies and assets.”

By Eurasianet.org