The G-20 has committed itself for the first time to addressing the taxation of the super-rich in a joint declaration signed in Rio de Janeiro (Brazil) by the bloc’s finance ministers. “With full respect for fiscal sovereignty, we will seek to collaborate in a cooperative manner to ensure that people with very high net worth pay taxes effectively,” says the document, which will be published tonight and to which EL PAÍS has had access. In it, the representatives of the world’s largest economies recognize that aggressive tax avoidance and evasion by the wealthiest can affect tax systems and reduce their progressivity, but they avoid mentioning a global tax or a common tax framework as a solution, an approach defended by Brazil, the country that holds the rotating presidency of the forum and which commissioned the French economist Gabriel Zucman to draw up a proposal to tax the world’s largest fortunes more.
Fernando Haddad, Brazil’s finance minister, had already announced on Thursday at the press conference after the meeting with his counterparts that the joint declaration would include the proposal defended by his country “to start thinking about international taxation not only for companies, but also for ultra-rich individuals” —an approach defended from the beginning by Spain—. Because that is what it is all about, a first step that represents a turning point in the international tax debate, since never before in a forum like the G-20 —which opened this can of worms just five months ago, last February— had a common position been agreed on such a hot and at the same time thorny issue as the taxation of individuals.
Sources close to the negotiations explain that all participating countries have been in favour of recognising that the taxation of the richest people, individuals who tend to have a high level of international mobility, must be corrected and that they structure their fortunes to reduce their tax obligations, so that they pay the corresponding amount to the treasury. Where there is no agreement is on how. Specifically, there are countries such as the USA and Germany that do not see the need for an international pact on the taxation of the wealthiest.
US Treasury Secretary Janet Yellen made this clear in her remarks in Rio de Janeiro: “We do not see the need nor do we believe it is desirable to try to negotiate a global agreement on this issue. We believe that all countries should ensure that their tax systems are fair and progressive.” That is why the heads of public finances of the bloc members mention in their joint statement “full respect for fiscal sovereignty” and “cooperative” collaboration rather than international coordination.
The agreement is, however, historic. Sources from a G20 government explain that, although there is no reference to a tax on the super-rich, there are several proposals to improve international collaboration in order to combat tax evasion and avoidance by large fortunes. “Cooperation could involve the exchange of best practices, the promotion of debates around tax principles and the design of mechanisms against tax evasion, including the addressing of potentially harmful tax practices,” the declaration states. The signatory countries also advocate holding future discussions both in the G20 and in other forums and seeking the contribution of international organizations, academics and experts.
“For the first time in history, there is now a consensus among G20 countries that the way we tax the super-rich must be corrected, and a commitment to work together to achieve this. This is an important step in the right direction,” said economist Gabriel Zucman, director of the EU Tax Observatory and one of the leading experts on tax evasion. The study commissioned by the Brazilian government concludes that if the nearly 3,000 richest people in the world, with assets of more than $1 billion, were to pay taxes each year on 2% of their wealth, states would have between $200 and $250 billion more on a global scale. Their proposal does not propose a tax on the world’s wealth. ad hoc on wealth, as could be the case with the Spanish tax on assets, but rather a standard that guarantees a minimum tax calculated based on the fortunes of this group.
The approach of the professor at the Paris School of Economics and the University of California (Berkeley) is partly inspired by the global agreement reached within the Organisation for Economic Co-operation and Development (OECD) and the G-20 for large multinationals to pay more taxes. And the joint declaration signed in Rio just invited this body formalised by the two institutions to consider “working on these issues in the context of effective progressive tax policies”, without however giving it an explicit mandate. This is another point on which there is no consensus, since the UN is also working to negotiate a new global tax framework within the organisation.
“This is an important global step forward: for the first time in history, the world’s largest economies have agreed to cooperate to tax the ultra-rich,” said Susana Ruiz, Head of Tax Policy at Oxfam International. A couple of weeks ago, the NGO coordinated, together with the Club of Madrid, the publication of a letter signed by twenty former heads of state and government from different countries – including Felipe González and José Luis Rodríguez Zapatero – in which they asked the US and the rest of the G-20 leaders to raise taxes on the super-rich. “At the G-20 summit in November this year, leaders must go beyond their finance ministers and support a concrete coordination: agree on a new global standard to tax the ultra-rich,” added Ruiz. A thesis shared by Nobel Prize winner and co-president of ICRICT (Independent Commission on the Reform of the International Corporate Tax System), Joseph Stiglitz: “Now is the time to go further and align the agenda with the ongoing UN process to reach a Framework Convention on International Tax Cooperation.”
Follow all the information of Economy and Business in Facebook and Xor in our weekly newsletter
#G20 #agrees #cooperate #taxation #superrich #mentioning #global #tax