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Rich, advanced countries, which have a strong say in the way multilateral institutions approach policy prescription for lending countries, where they ask them to adopt a procyclical policy– increase taxes, even when economic growth is stagnating, and is at a low level– to create fiscal space for servicing debt, and making development, and welfare expenditure.
Instead, G-7, or even G-20, countries should throw their weight behind creating greater lending space with multilateral institutions– especially the International Monetary Fund (IMF) through increasing the size of its special drawing rights (SDRs) envelope, not to mention shifting its allocation criterion away from quota basis, to largely countries’ balance of payments, and budgetary support needs– by rationalizing taxation for the super-rich, the billionaires.
‘As Joe Biden has pointed out, US billionaires make their money in ways that are often taxed at lower rates than the ordinary wage income of American workers. Overwhelmingly, their wealth comes from the rising value of their assets, and they use tax loopholes and legal accounting moves to minimise the tax they pay. Wealthy Americans pay an average tax rate on their incomes of just 8%. Biden thinks they should be paying a minimum of 25%. The Brazilian government has an even more ambitious proposal– for an annual global tax levied at 2% on the wealth of the world’s billionaires.’
This will support developing countries adopt counter-cyclical policies– decrease taxes during economic downturn to boost consumption-, and investment expenditure to boost growth, and lay a more sustainable-, and deeper basis for domestic resource mobilization.
Moreover, a number of these developing countries are among the most vulnerable countries, when it comes to facing the climate change crisis. Having said that, the share of these countries is in general minuscule in terms of carbon footprint, while many of the rich, advanced countries, including fast developing countries like China, have had a strong carbon footprint– more recently though than the advanced countries though– and climate justice requires that they in addition to pushing for taxing the super-rich, should expedite greater flows of climate finance towards developing countries. Yet, the record of rich countries in this regard, is lacklustre to say the least– for instance, the pledge in 2009 to provide $100 billion annually to developing countries in climate finance, could only be met in 2022!
There are around 3000 billionaires globally currently, and there are calls for better tax rationalization for the super-rich, who otherwise avoid taxation through exploiting tax loopholes. An April 25 article in Guardian, titled ‘World’s billionaires should minimum 2% wealth tax, says G20 ministers’ pointed out in this regard ‘In a sign of growing international support for a levy on the super-rich, Brazil, Germany, South Africa and Spain say a 2% tax would reduce inequality and raise much-needed public funds after the economic shocks of the pandemic, the climate crisis and military conflicts in Europe and the Middle East.’
Moreover, renowned economist, Gabriel Zucman prepared a report, about which a June 25 Guardian published article ‘International scheme to tax billionaires’ pointed out ‘An international scheme to tax the wealth of the world’s 3,000 billionaires is technically feasible and could net up to $250bn (£197bn) a year in extra revenue, a new report says. A study by the French economist Gabriel Zucman concluded that progress in finding ways to tax multinational corporations meant it was now possible to levy a global tax on individuals– even if not every country agreed to take part. Zucman prepared the report after being invited by Brazil– which now holds the presidency of the G20 group of developed and developing nations– to examine ways of increasing the low levels of tax currently paid by the super-rich.’
Giving more technical details, and calling for much-needed multilateral support, the report as per the same article, indicated ‘The report said billionaires were currently paying an average of 0.3% tax on their wealth– less than the rates paid by workers. Zucman said the average wealth of the top 0.0001% of individuals had grown by 7.1% a year on average between 1987 and 2024, increasing the share of global wealth of billionaires from 3% to 14%. Describing his plan as a top-up to income tax so that billionaires paid an annual tax bill worth at least 2% of their wealth, Zucman said progressive taxation was a “key pillar of modern societies”. International cooperation was needed to prevent a “race to the bottom”, he said, but it was not necessary for every country to sign up for the idea to get off the ground. The US opposes a global tax on wealth, although Zucman said Joe Biden’s budget proposal to tax America’s super-rich was consistent with his plan.’
A March 11 ‘Fact Sheet: The President’s budget cuts taxes for working families and makes big corporations and the wealthy pay their fair share’ published by The White House, pointed out in this regard ‘Billionaires make their money in ways that are often taxed at lower rates than ordinary wage income, or sometimes not taxed at all, thanks to giant loopholes and tax preferences that disproportionately benefit the wealthiest taxpayers. As a result, many of these wealthy Americans are able pay an average income tax rate of just 8 percent on their full incomes – a lower rate than many firefighters or teachers. To finally address this glaring inequity, the President’s Budget includes a 25 percent minimum tax on the wealthiest 0.01 percent, those with wealth of more than $100 million.’
Moreover, as per a May 2 Guardian published article ‘Why are billionaires scared of Brazil’s plan to hit them with a global tax? Because it makes perfect sense’ indicated ‘As Joe Biden has pointed out, US billionaires make their money in ways that are often taxed at lower rates than the ordinary wage income of American workers. Overwhelmingly, their wealth comes from the rising value of their assets, and they use tax loopholes and legal accounting moves to minimise the tax they pay. Wealthy Americans pay an average tax rate on their incomes of just 8%. Biden thinks they should be paying a minimum of 25%. The Brazilian government has an even more ambitious proposal– for an annual global tax levied at 2% on the wealth of the world’s billionaires.’
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