Years ago, Cor van Zadelhoff, the well-known real estate millionaire, had a discussion about paying taxes with former Minister of Finance Gerrit Zalm (VVD). Van Zadelhoff likes to put money into charities, but is less interested in paying taxes. Then Zalm said: paying taxes is also a good goal, right?
Yes, said Van Zadelhoff, told he later on The Financial TimesThe former minister could well be right about that. “But do you blame me for wanting to decide for myself which charities I want to donate to? We've earned it ourselves, haven't we?”
The majority of millionaires in the world's largest economies would like to pay more taxes, was the gist of a much-discussed report published this week. To reinforce that message, the initiators presented one at the World Economic Forum in Davos open letter to the world leaders present there: “Our request is simple: we ask you to tax us, the richest in society.”
According to the report, prepared by a group of wealthy people who call themselves Patriotic Millionaires, 74 percent of the super-rich have no problem paying more taxes. In this way they can contribute to better public facilities or to absorbing the increased costs of living. The majority of millionaires are also happy to contribute to the energy transition or increasing minimum wages.
The researchers derived these conclusions from a poll among almost 2,300 wealthy people from prosperous countries, people with disposable assets of more than 1 million euros. Their message was not completely new; a group of millionaires made a similar appeal four years ago. But according to this new report, support for higher taxes among the world's wealthiest citizens is increasing every year.
That is of course good news, because worldwide there are a lot of initiatives to improve taxation at large companies and wealthy individuals. Consider the recently introduced minimum rate for profit tax in the EU, or the motion to investigate a 'millionaires tax' that the House of Representatives adopted at the end of 2022. If multimillionaires themselves are less inclined to set up tax structures to avoid income or wealth taxes, part of the problem will solve itself.
Little known billionaires
However, there are a few comments to be made about the report. For example, it was not so much the 'super rich' who took part in the poll – with a fortune of 1 million euros you are not even among the richest 1 percent in the Netherlands, for that you need 2.2 million euros according to the Central Bureau of Statistics. necessary.
The list of signatories to the open letter included little-known billionaires, the Elon Musks of this world were missing. Who did sign it: the activist heiress of the German chemical company BASF Marlene Engelhorn, who wants to give away her fortune of 25 million euros, the British actor Brian Cox (Logan Roy from the hit series Succession) and the Dutch author Rutger Bregman. No Fentener van Vlissingen, no Heineken. The richest Dutch signatory of the call – asset manager Peter Groenen – has according to business magazine Quote with assets of 30 million euros.
A more important note is the willingness to pay more taxes conditionally seems. In the open letter – and in the poll among millionaires – six specific destinations for the extra tax revenue were mentioned, such as the energy transition or better healthcare facilities. The poll found that many millionaires are quite willing to pay more taxes if, à la Cor van Zadelhoff, they have some insight into how that money is spent. The question is whether the support would have been as great if the researchers had asked whether the extra tax revenues could also go to benefits or development aid.
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The super-rich are even better off in the Netherlands than in the US
The reality is that there is an overwhelming amount of evidence to the contrary of the report's claim: most millionaires don't like paying taxes at all. For example, in 2021, data from the US tax authorities showed that the twenty-five richest Americans paid hardly any tax thanks to clever tax constructions. Amazon founder Jeff Bezos, one of the richest people on earth with a fortune of $170 billion, had even claimed a $4,000 deduction for his children.
This is no different in the Netherlands. From internal documents of the Tax Authorities Follow the Money revealed, it turned out that wealthy taxpayers are investing their capital en masse in BVs (box 2) in order to avoid capital gains tax. In box 3 – where assets are taxed – the taxable amount for very rich people is “usually zero,” according to an inspector involved. As a result, according to the inspectors, the treasury misses out on “gigantic amounts” every year.
Between 2007 and 2020, the Dutch also avoided 1.5 billion more inheritance taxes per year, according to pale last year from research published in the economists' journal ESB. That is the same as the inheritance tax that is paid, also 1.5 billion per year. And research by the EU Tax Observatory, a research institute, showed last year that the richest Dutch people often pay only 20 percent income tax, half of the average taxpayer. According to the research, billionaires were even better off here than in the US.
In that sense, the report presented this week, from which media worldwide eagerly quoted, is something of a marketing stunt. However useful the apparently growing movement of fiscally willing millionaires is, it does not diminish the political need to come up with rules for fairer taxation.
Steps taken
Steps have already been taken in this regard in recent years, both nationally and internationally. For example, the tax-free passage of royalties and dividends through the Netherlands has been made more difficult, and more than a hundred countries have been automatically exchanging bank information since 2017. The latter led to the fact that three-quarters of the assets stored in tax havens were first taxed somewhere in the world. Previously, that money was tax-free.
Millionaires who really like to pay more taxes “are probably the exception,” French economist Gabriel Zucman said last year in conversation with NRC. “Most wealthy people want to shield their assets and companies. People sometimes want to reach out to those mega-billionaires and get them involved in reforming the tax system. But it is not up to the ultra-rich to determine tax policy,” Zucman said at the time. “Progress will not come from those billionaires. We have to achieve this democratically ourselves.”
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