Lula government’s proposal, taken to the Pope, faces opposition from rich countries, especially the US; if it fails, it will be seen as an international defeat
Brazil’s main economic proposal as the G20 presidency, the global taxation of billionaires, faced resistance, especially from rich countries, during negotiations on the declaration on international tax cooperation at the G20 finance ministers’ meeting. The meeting was held last week in Rio.
The difficulty in moving forward with the issue shows that the idea presented by the president Luiz Inácio Lula da Silva (PT) and led by the Minister of Finance, Fernando Haddadshould take longer to be implemented than the government would like and may encounter insurmountable resistance.
At the G20, the group that brings together the world’s 19 largest economies, the European Union and the African Union, Haddad said that the mention of taxation of the super-rich in a document from the bloc is “historic”, one “conquest of a moral nature” and must be celebrated.
But he admitted that the processes for taxation to actually be incorporated by countries “have relatively slow courses on the international agenda”. Still, he said the G20 will be remembered as the starting point for a “new global dialogue on tax justice”.
The minister cited as an example the so-called pillar 1 of the OECD (Organization for Economic Cooperation and Development), which deals with the taxation of multinationals. The topic has been under discussion for almost a decade in world forums. For this reason, the Brazilian government is trying to dispel the interpretation that any delay in implementing the proposal could be seen as a defeat.
During the G20 negotiations, Brazil had to give in. Members of the bloc agreed to present the issue in a document separate from the statement on general economic matters. The format was negotiated to prevent countries opposed to the proposal from blocking the inclusion of the issue in the ministers’ final document. The text on the tax issue was the responsibility of Brazil. Read the full (PDF – 253 kB) of the approved document, in English.
The Secretary of International Affairs of the Ministry of Finance and coordinator of the G20 Finance Track, Tatiana Rosito, downplayed the situation and denied that the separation of the statements was intended to circumvent resistance from some countries. For the secretary, the matter is unprecedented and, due to its importance, deserved a specific statement.
In addition to the divisions in the texts, rich countries, especially the United States, opposed including an explicit promise to implement an international system to tax billionaires. The final document had a more moderate tone, in which nations reaffirmed their commitment to promoting global dialogue on fair and progressive taxation.
On Thursday (25.Jul.2024), the United States Treasury Secretary, Janet Yellen, stated that it is very difficult to coordinate tax policies between different countries and that she does not see the need, nor does she think it is desirable, to negotiate an international agreement on the taxation of billionaires.
The Americans believe that the matter should be dealt with by each nation, especially since there would be different legal interpretations and local forms of implementation. In the United States, for example, it would depend on the decision of each state.
Brazil’s proposal is based on studies by French economist Gabriel Zucman. His plan is to charge a minimum annual tax rate of 2% on the wealth accumulated by those who have more than US$1 billion. Currently, around 3,000 people worldwide have this wealth, with only about 70 in Brazil. The calculation presented is that US$250 billion (around R$1.4 trillion) could be collected per year worldwide. Here is the full of the data (in English, PDF – 549 kB).
Zucman says that the average effective tax rate for the super-rich is currently 0.3% of their total wealth. According to the economist, one of the biggest challenges for taxation is mapping wealth.
Lula says that the goal of the idea is to combat income inequality in the world and, based on the contributions of the richest, adopt global policies to combat hunger and poverty. There are also proposals that part of the resources be used to finance the ecological transition through funds.
Haddad even took the proposal to Pope Francis when he visited the Vatican in June. Faced with resistance from the most developed countries, the minister is trying to garner international support. Lula will always be able to say that he proposed a solution to end poverty to the world, but that the rich rejected the idea – and that, therefore, it is not his fault.
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