Taxation | Many super-rich people don’t pay tax at all – a top researcher tells how to fix the problem

International the taxation system is broken and it is high time to fix it, says the professor of economics at the Paris School of Economics Gabriel Zucman.

“The richest of all have several ways to avoid income tax, but in addition to that, they can avoid taxation on their wealth. This causes that in certain cases the extremely rich pay almost no tax at all.”

Zucman is one of the world’s leading taxation researchers, who also works as an assistant professor at the top American university in Berkeley. Last year, he was awarded an honorary degree in economics of John Bates Clark a medal that many Nobel laureates have previously received.

He visited Helsinki on Wednesday at a seminar organized by Wider, the UN Development Economics Research Institute.

Zucman’s the proposal is relatively simple: a minimum tax of two percent should be levied on the wealth of all the richest people. By the richest, he means people whose assets are worth several hundred million euros or more than a billion euros.

The tax would only be levied if the tax rate for the richest is close to zero. If they pay a total of more than two percent in tax, Zucman’s proposed “billionaire tax” would not be levied.

According to his calculations, the income from the “billionaires’ tax” would be more than 200 billion euros annually. It could be used for investments needed to combat climate change and reduce social inequality.

“I discovered the necessity of the tax while studying the progressivity of tax systems. My views are based on studies of the shortcomings of the international tax system.”

The only problem is that tax information is not always public and billionaires are good at hiding their assets.

“The exchange of information between authorities is important and the introduction of a ‘billionaire tax’ would require international cooperation between states. The European Union could set an example.”

Three years ago US A ProPublica publication found that the world’s richest pay very little tax on their income and wealth.

Based on the report, for example, the founder of the online store Amazon and the current chairman of the board Jeff Bezos and the CEO of Tesla, which manufactures electric cars Elon Musk from time to time have not paid income tax at all.

According to the news agency Bloomberg, the calculated value of Bezos’ assets is currently 200 billion dollars and Musk’s is 250 billion dollars.

“Bezos doesn’t raise his salary, Amazon doesn’t pay a dividend, and Bezos hasn’t sold shares, so he really hasn’t necessarily had any taxable income at all. These are startling examples, but they speak to a wider international problem that needs to be fixed.”

In most of them in western countries, taxation is progressive. It means that taxation gets tougher based on how big the income is. However, there are numerous cases where the extraordinarily rich get to enjoy regressive taxation: taxation is actually reduced when income or wealth is astronomical.

“When you look at these taxes for the richest of all, they pay an average of 20 to 25 percent in taxes, while high earners can have a tax rate of 40 to 50 percent. So in almost all social groups, taxation is predominantly progressive, but it suddenly becomes regressive only in the case of the super-rich.”

Taxation is the foundation of societies and the most important value choices in economic policy. Taxes finance welfare services, education and infrastructure, which promote economic growth and the development of human capital.

One in Zucman’s opinion, one of the most important changes in the development of societies has been precisely progressive taxation, which was introduced internationally at the end of the 19th century and the beginning of the 20th century.

“Progressive income taxation supplemented by a wealth tax of the richest two percent and progressive inheritance taxation are the most important. A progressive inheritance tax is needed for meritocratic reasons alone.”

Meritocracy means a society where people have the same opportunities to succeed based on their skills and talents, without the advantage of inherited wealth.

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“The strong concentration of wealth is an increasing problem.”

Zucman emphasizes that for ordinary people, prosperity means security. Instead, for the extremely wealthy, it primarily means influence on politics. legislation and the media.

“Hardly anyone supports the concentration of power, which would undermine the foundations of democracy. Wealth concentration is a process that may not be noticeable until a long time later. Once wealth is highly concentrated, it can be very difficult to undo the concentration.”

The numbers are staggering. The wealth of the world’s 3,000 richest is roughly 14,000 billion euros, which corresponds to 13 percent of the world’s gross domestic product.

“The strong concentration of wealth is an increasing problem. When the extremely rich pay even less tax than others, this is a significant injustice in the international tax system.”

His proposal Zucman considers the realization very possible. He appeals to the fact that the international minimum tax of 15 percent for large companies came into force at the beginning of the year, which many years ago thought was a utopia.

The minimum tax for large companies introduced at the initiative of the Organization for Cooperation on Industrialized Nations OECD works, although not all countries follow it. If the company’s effective tax rate is less than 15 percent in one of the countries where it is located, additional tax can be charged.

“Because of this, not all states would need to introduce a billionaire tax, because the tax can be charged as a supplementary tax in the states where it has been introduced.”