Marlene Engelhorn is in her early 30s, she is the heir to the billion-dollar fortune of the multinational BASF and, like a large group of super-rich people from different backgrounds, she stood in January at the Davos Forum asking political leaders to pay more taxes. to combat inequality.
The International Monetary Fund (IMF) suggested designing a temporary rate on the highest incomes to finance the costs of the pandemic.
Brazil, which holds the temporary presidency of the G20, aspires to conclude a joint declaration this summer on a minimum tax on the wealthiest.
And the largest economy in the world, the United States, where tax increases are not usually welcomed, has just proposed that higher assets be taxed more.
Mere coincidence or the beginning of a tax revolution so that the richest people in the world pay more taxes?
Never before have so many and so different voices focused at the same time on taxes on large fortunes, which aspire to become one of the hot topics of the international debate in a context of growing inequality and in which countries need more resources to face major challenges: the enormous debt accumulated with the pandemic, the ecological transition, digitalization or aging.
“The very rich must pay more taxes for many reasons.
We have seen the five richest men in the world double their fortune since 2020, while 5 billion poor people have decreased their wealth,” says Rebeca Gowland, international director of Patriotic Millionaires, an association founded in 2010 in the United States following a letter that 60 millionaires sent to the then president, Barack Obama, to raise taxes on the largest fortunes.
Now it brings together more than 300 people.
“The current economic system is designed to benefit a very small number of very rich people.
“Workers pay much higher tax rates.”
The data is not lacking and is very eloquent.
The number of billionaires is small, about 2,700 people, but their fortune is overwhelming and they do not stop gaining weight.
It grew by 7% between 2022 and 2023, to exceed 12 trillion dollars, almost 10 times the Spanish GDP, according to the latest
Report on Billionaire Ambitions
from the Swiss bank UBS.
Most of them reside in the United States. Another striking fact is that the new super-rich have achieved this status more by inheritance than by entrepreneurial initiative.
That is, by birth and not by work.
Three decades ago, in 1995, there were only 377 taxpayers considered billionaires, who accumulated less than a billion.
This small but powerful group of people is not only accumulating more assets, they are also improving their strategies to reduce their bill with the public treasury.
According to the
EU Tax Observatory's
Global Tax Evasion 2024
report, the mega-rich—that is, those with assets exceeding $1 billion—pay a ridiculous percentage of personal taxes such as personal income tax compared to their fortune: a type effective of between 0% and 0.5%.
There are many examples.
When the pandemic was still raging, in the summer of 2021, the income tax returns of the 25 richest people in the United States, such as Elon Musk, Bill Gates and Michael Bloomberg, came to light.
According to this information, disseminated by the ProPublica journalist network, the country's great magnates support a lower effective rate than the working class.
A good part of this paradox lies, very simply, in the fact that the system allows it.
Wealth, understood as properties, shares, companies, has better tax treatment than income from work.
In the USA and in Spain.
The wealthiest are also large consumers of tax engineering services: they structure their assets so that they generate little income and taxable income, for example through instruments such as holding companies.
The French Minister of Finance, Bruno Le Maire, made this very clear in the meeting with his G20 counterparts that just took place in Sao Paulo.
“The richest can avoid paying the same level of taxes as others who are less rich.
We want to prevent it,” he said.
And he launched a declaration of intent: “We want Europe to advance this idea of minimal taxation for individuals as quickly as possible, and France will be at the forefront.”
His Brazilian counterpart, Fernando Haddad, urged in the same forum to act “together” to limit the tax evasion and avoidance of the mega-rich and create a global tribute to the great fortunes, in line with the minimum tax on multinationals agreed upon by more than 140 countries under the leadership of the OECD (Organization for Economic Cooperation and Development).
“There is a growing sensitivity on this issue,” acknowledges Pascal Saint-Amans, an analyst at the Bruegel think tank and the greatest expert on multilateral negotiations on tax matters.
He experienced them firsthand for years: he was director of the OECD Center for Tax Administration and Policy when the agreement on the taxation of multinationals was sealed, a position that he abandoned after the pact was reached.
Perhaps that is why, having been behind the scenes, he is cautious about the possibility of following the same path with billionaires: “Personally, I think there is no possibility of seeing a global minimum tax for the rich in the short term.”
The countries are too different, there are some with high taxes and almost non-existent taxation, he justifies.
“However, there must be a way to fight against tax competition from the rich, who are more mobile [have an easier time changing residence] than the rest of the population.
The OECD, for example, could start working to address harmful tax practices.
In the long term, there could be scope for increased cooperation.
Let us not forget that the end of banking secrecy has already occurred, which allowed countries to tax capital better,” she clarifies.
More information
Gabriel Zucman: “It is not up to the rich to decide how much taxes they should pay”
An opinion to some extent shared by the American economist Kimberly Clausing, professor at UCLA and member of the Peterson Institute for International Economics: “I think it is a good starting point to have this conversation and understand why it is desirable to tax those who are in the top, at least at a minimum level.
And another starting point could be Europe.
Because there is enormous mobility, but tax rights are mainly set at the level of the nation state.
You could lead by example and build consensus.
But I think it's harder to get 140 countries together and say 'we're all going to agree to a certain minimum rate.'”
It alleges that the distribution of income and wealth is different in each country.
“It makes no sense for Sweden and the United States to adopt the same marginal rate, because the underlying economic problems are very different, even though they are both rich countries.
So, you can start with the exchange of information, ensure that countries enforce their own laws, build a kind of intellectual argument or consensus that the tax system plays a crucial role,” he adds.
One of the great generators of consensus or, at least, information on the subject, through his academic and research activity, is the French economist Gabriel Zucman.
Professor at the University of Berkeley, the Paris School of Economics and director of the EU Fiscal Observatory, he has just presented his proposal for a minimum tax on the highest assets to the G20 of Finance Ministers.
The initiative, detailed in the report
Global Tax Evasion
of which he is co-author, would allow, according to his calculations, to raise an additional 250 billion dollars per year on a global scale.
Wealth tax
Spain is not a land of great fortunes compared to neighboring countries: it only had 24 billionaires in 2023, according to UBS data, who accumulated a combined wealth of $129 billion.
In Germany there were 109 taxpayers, with 496,000 million in total, compared to 34 in France, which however concentrated a very high wealth: 501,000 million dollars.
Despite these numbers, Spain is the only member of the EU that taxes wealth in its entirety through not one, but two taxes: wealth taxes, autonomous, and large fortunes, state and temporary, but that the Government wants to make permanent.
In the European environment, only Switzerland and Norway have similar figures.
“Most countries have eliminated the wealth tax in recent years [one of the most recent cases is France] because it has a negative effect on investment and raises very little.
It is an obsolete figure and represents double taxation: it taxes assets that have already been taxed, for example, in income or inheritances and donations,” argues Cristina Enache, economist at the Tax Foundation
think tank
.
She considers that, although there is an open debate on the taxation of large fortunes at an international level, “you cannot open the door to the field”: “The issue has appeared on the agenda, but I do not see any progress in it.”
That the Spanish tax on Spanish wealth is obsolete and brings in very little is a fact shared by economists from all sides.
Nor has the new tribute to great fortunes entailed qualitative leaps: it follows the design of its regional counterpart, except for the fact that the threshold from which it is required is higher, three million euros.
However, there is a broad consensus on maintaining the inheritance tax and, at the same time, on the need to thoroughly remodel wealth taxation, a conclusion reflected in the
White Paper
for tax reform.
Although we usually talk about a millionaire tax or simply wealth tax, the reality is more complex.
There are different dimensions of wealth—real estate, bank accounts, companies, shares, dividends, inheritances, donations...—and therefore different ways to demand a larger contribution from the wealthiest.
In fact, although France has eliminated the equivalent of the wealth tax, it has maintained special taxation for certain assets, like other countries.
The proposal by Zucman and his team is to establish a minimum global tax of 2% only for billionaires.
This would be calculated based on his fortune since, he argues, it is the measure that best defines the economic capacity of the group—and not income.
“It is in line with what has been done in taxation by multinationals.
There is an international agreement on a global minimum tax of 15% that applies in the EU from January 1 of this year.
The next step is to do the same with very rich people,” he said in a recent interview with EL PAÍS.
And if no deal is reached, he urges each country to move forward unilaterally.
Abdul Muheet Chowdhary, of the South Center Tax Initiative, an organization that represents developing countries, has the same idea.
“International cooperation and unilateral solutions are complementary,” he explains.
“Countries should immediately consider implementing unilateral solutions because that is currently feasible.
There is no ready-made international solution and developing one will take time.
However, it is clear that unilateral solutions are not enough,” because there is a risk that large fortunes will move their residence.
There is also a feeling that there is
momentum
.
The corporate tax reform has reached a sort of end of cycle with the implementation of the minimum rate of 15%.
Although work continues on the other leg of the OECD agreement, the so-called pillar one – taxing part of the profits of the largest multinationals –, it is already considered dead because the United States and China, where the majority of these companies reside, They will not apply it.
On the other hand, the South of the world is asking to have more voice in the international tax debate, and is doing so through a new channel: the United Nations.
Last November, the bloc of developing economies prevailed to negotiate a new global fiscal framework within the organization.
“In the immediate future, the reform could be promoted by those countries that have the most to gain from this tax, where the billionaires reside: the United States and Europe,” says Chowdhary, who also represents the South Center on the tax subcommittee on the tax. UN heritage.
He acknowledges, however, that the few national figures who have so far taxed large fortunes have not made great strides in tax justice.
“But just because it hasn't happened in the past doesn't mean it can't happen in the future.
“Wealth taxes have great potential and, if well designed, can reduce inequality and improve redistribution.”
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