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Economy
Mahesh

07/07/24 10:07 AM IST

Uber-rich worldwide be taxed or not

In News
  • French economist Gabriel Zucman has in a recent report commissioned by Brazil’s G-20 presidency recommended an annual 2% tax on individuals holding wealth exceeding $1 billion.
About Proposal
  • Mr. Zucman, an economist who has extensively researched the accumulation, distribution and taxation of global income and wealth, has proposed the adoption of an internationally coordinated minimum tax standard for ensuring effective taxation of ultra-high-net-worth individuals.
  • At the minimum, he recommends that individuals possessing more than $1 billion in total wealth (assets, equity shares in both listed and unlisted companies, other ownership structures that enable participating in companies’ ownership, etc.) would be required to pay a minimum amount of tax annually that would be equal to 2% of their wealth. 
  • Such a minimum tax on billionaires could potentially raise $200-$250 billion a year globally from about 3,000 individuals, and were it to be extended to cover those with a net worth exceeding $100 million, would add $100-$140 billion annually in global tax revenue. 
Why such a tax?
  • As per a key finding of the Global Tax Evasion Report 2024, prepared by researchers at the EU Tax Observatory, global billionaires benefit from very low effective tax rates, which range between 0% and 0.5% of their wealth.
  • When expressed as a fraction of income and considering all taxes paid at all levels of government (including corporate taxes, consumption taxes, payroll taxes, etc.), the effective tax rates of billionaires appear significantly lower than those of all other groups of the population.
  • The  wealth of the top 0.0001% households, expressed as a fraction of world GDP, has surged more than fourfold since the mid-1980s.
  • In 1987, the top 0.0001% owned the equivalent of 3% of world GDP in wealth.
  • This wealth gradually rose to 8% of world GDP on the eve of the global financial crisis of 2008-2009. It briefly fell during the crisis, and then rose fast to exceed 13% of world GDP in 2024.
  • The average annual growth rate of this population group’s wealth is 7.1% net of inflation.
  • In contrast, over the same almost four-decade period, the average income of an adult grew annually by 1.3% net of inflation, and average wealth increased by 3.2% a year. 
Significance of the idea
  • Brazil, Latin America’s largest economy, is the main backer. France, Spain, Colombia, Belgium, the African Union and South Africa, which will assume the G-20 presidency next year, have also backed the idea. 
  • India has seen a disproportionately sharper increase in wealth at the top of the pyramid over the nine-year period to 2023.
  • A tax of just 2% on the total net wealth of the 162 wealthiest Indian families in 2022 would yield revenue to the tune of 0.5% of national income (more than twice the central government’s budget expenditures on the National Rural Employment Guarantee Act in recent years).
Source- The Hindu

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