Brazilian President , hosting the summit in Rio de Janeiro from Monday, will try to progress plans to , who often use complex loopholes to avoid tax.
At a July in Rio, the world’s wealthiest nations agreed to start a “dialogue on fair and progressive taxation, including of ultra-high-net-worth individuals,” despite fierce resistance from the and within now collapsed coalition government.
While the world’s growing geopoltical issues — the Ukraine and Gaza conflicts, the prospect of a second Trump term and China trade — are expected to dominate the two-day summit, Lula hopes to move the wealth tax plan forward as the money raised from billionaires will help boost other pressing global issues.
Advocates say new tax would cause little pain
Devised by French economist Gabriel Zucman, the plan would introduce an annual of 2% on the total net worth of the uberwealthy — not just their annual income. This would include real estate assets, corporate shareholdings and other investments. Zucman estimates that the top 0.01% of the population pay an effective tax rate of just 0.3% of their wealth.
The new levy could raise up to $250 billion (€237 billion) a year from the nearly 2,800 billionaires globally, who have a combined net worth estimated at some $13.5 trillion, according to the Forbes World’s Billionaires Richlist. The funds raised would be used to tackle growing global inequalities, especially among heavily-indebted low-income countries, including many in Africa.
“The taxation of high net-worth individuals is very important as it could be a source for funding initiatives that fight hunger and poverty, and also tackle ,” Tomas Marques, a research fellow at Hamburg’s GIGA Institute for Latin American Studies, told DW.
Developing nations, who many scientists say are being disproportionately affected by climate change, have for years, demanded funding to offset its worst impacts. Success stories include World Bank and Green Climate Fund support for India’s bid to boost solar power capacity and Brazil’s Amazon Fund, aimed at reducing deforestation, which is part-funded by Norway and Germany.
Skepticism over G20 spending plans
While there may be broad public support for new taxes on the ultra-wealthy, the rise of national populism in many G20 countries is increasing scrutiny about how public money is spent, amid concerns that international aid and development funds could be better deployed at home.
“Most of the G20 countries are having a hard time balancing their budgets,” Maria Antonieta Del Tedesco Lins, an economist and associate professor at the University of Sao Paulo, told DW. “While extra taxes would help, it’s very hard to juggle national pressures with new international or multilateral obligations.”
Monday’s opening ceremony in Rio will launch the Global Alliance Against Hunger and Poverty, an initiative under G20 presidency that seeks to accelerate efforts in the fight against poverty and a lack of food by 2030.
The Brazilian government is also the principal backer of the proposed tax on the ultrawealthy, along with France, Spain and South Africa. Despite this support, the lower house of Brazil’s parliament, the Chamber of Deputies, last month rejected plans for an additional domestic levy on those with large fortunes.
“It’s a shame because Brazil could benefit a lot [from this tax] because we are a very unequal country. If there was an international consensus [on taxing the superrich] it could help negotiations in the Brazilian Congress,” said Lins, who took part in a G20 academic engagement group ahead of the summit.
In Brazil, as in the rest of the world, the wealthy often shield their wealth from tax authorities by creating shell companies in countries with low or zero taxes, taking advantage of banking secrecy laws and forming trusts and charitable foundations, which offer generous tax breaks.
US spurns wealth-tax proposal
While China’s and India’s positions on the new tax are ambiguous, Washington remains firmly opposed. US Treasury Secretary Janet Yellen told the Wall Street Journal in May that the measure was “something we can’t sign on to.”
Incumbent President Donald Trump has yet to comment on the proposal but is unlikely to back hiking taxes on the uber-rich. His first term was marked by large tax cuts — which benefitted wealthy individuals and corporations the most. But during his shortlived run for the White House in 2000, he did promise to cut the national debt by levying a one-time 14.25% tax on the wealthy.
Lula then faces tough odds in making any meaningful progress during the two-day summit, especially as many critical geopolitical issues, as well as Brazil’s proposal to improve global governance will also dominate the talks.
“Lula is a great negotiator,” Marques said. “He bills himself as a bridge builder between the Global South and Global North. But I don’t know how he can reach a consensus around this very sensitive topic.”
Wealth tax — a boon for Africa
Better representation at G20 for Africa is now critical, as the continent seeks to benefit from any new tax plan, through the receipt of poverty and climate alleviation funds. The , the regional bloc of 55 African countries, will be attending the Rio summit for the first time, after being admitted as a full G20 member in August.
Next year, will take over the rotating G20 presidency — the fourth consecutive leadership of the bloc from the Global South, after , and Brazil. The role will give the country and Africa as a whole further opportunities to shape global policies and advocate for the continent’s interests.
“African countries have been underrepresented in the G20 despite the continent’s importance globally,” Marques, who is in Rio for the summit, told DW. “But things are changing and the African Union is now starting to have some influence on policymaking.”
Edited by: Uwe Hessler
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