EU Think Tank Proposes Global Minimum Tax on Billionaires
- A global minimum tax on billionaires, equal to 2% of their wealth, could raise nearly $250 billion a year, according to a think tank co-funded by the European Union.
- The EU Tax Observatory proposed such a tax in a report released Sunday and said it would affect fewer than 3,000 billionaires. Billionaires have effective tax rates equivalent to zero to 0.5% of their wealth because they use shell companies to dodge income taxation, said the think tank, which is located at the Paris School of Economics.
- The developing countries need $500 billion annually in additional public revenue to address the challenges of climate change – needs that could be fully addressed by the tax reforms.
- The other recommendations include reforming the international agreement on minimum corporate taxation to implement a rate of 25% and remove the loophole that foster tax competition, setting up a mechanism 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.
- It also backed the creation of a global asset registry to better fight tax evasion and strengthening the application of economic substance and anti-abuse rules.
- Before 2013, households owned the equivalent of 10% of world GDP in financial wealth in tax havens globally, the bulk of which was undeclared to tax authorities and belonged to high-net-worth individuals. Today there is still the equivalent of 10% of world GDP in offshore household financial wealth, but in our central scenario only about 25% of it evades taxation, according to the report.
- It argued that unilateral action, or multilateral action by a leading group of countries, could “pave the way for eventually nearly global agreements”, which would “accelerate rather than impede global cooperation”.
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