4th Dec 2023

Global 'billionaires tax' could raise €236bn, report finds

  • Until 2015, the equivalent of nine percent of global GDP was held untaxed in tax havens. This has now fallen to between three and four percent (Photo: Unsplash)
Listen to article

Billionaires pay far less tax than ordinary citizens relative to their income, and in many countries use personal holding companies to avoid income tax at the "border of legality" — but no serious effort has been made to address the situation, says a new report by the EU Tax Observatory.

So far, effective tax rates on the wealth of the world's richest have remained very low [at 0-0.5 percent].

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

In some EU member states, such as France, it is close to zero percent. This is partly because, in many countries, personal wealth-holding companies have fallen outside the most effective tools used to combat tax avoidance, say the authors of the Global Tax Evasion report.

"Tax evasion, wealth concealment, profit-shifting to tax havens are not laws of nature. They are the results of policy choices or of the failure to make certain choices," Gabriel Zucman, co-author of the report, said.

On this basis, the Paris-based EU-funded research lab proposes a global minimum two percent annual tax levied on the wealth rather than income of the world's 2,756 richest people, which could raise $250bn (€236bn).

"So many people struggle to make ends meet yet pay the taxes their governments ask of them. We need to make sure those at the top of the income ladder who certainly have the financial means don't wriggle out of them," Nobel prize-winning economist Joseph Stiglitz commented on the report.

The fight against tax evasion is becoming increasingly important in a context of high public debt following the Covid-19 pandemic and the investments that climate change will require — to name just two of the challenges ahead.

"This is the logical next step after the global minimum tax on multinational companies — which demonstrates that it is possible for countries to agree on minimum tax rates," Zucman added.

Overall, tax evasion by the rich has not declined, but offshore tax evasion by individuals has fallen since 2016 due to the end of bank secrecy. Over the past 10 years, it has decreased by a factor of about three, following the automatic exchange of banking information between countries.

Until 2015, the equivalent of nine percent of global GDP was held untaxed in tax havens. This has now fallen to between three and four percent, although there is still room for improvement, the report notes.

The same goes for the 15 percent global minimum tax on multinationals, agreed by 140 countries in 2021, to curb profit-shifting to tax havens.

At the time, it was estimated that it would increase overall corporate tax revenues by around 10 percent. However, a number of "loopholes" have reduced the expected revenue by as much as a factor of three.

The report recommends the elimination of those loopholes that encourage international tax competition, and the reopening of international negotiations on the minimum tax for large companies, with a view to raising it to 25 percent.

'Toothless' EU tax-havens list

In 2022, one trillion dollars in profits were shifted to tax havens, meaning that multinationals made profits in relatively low-tax countries where there is no real activity of that magnitude.

About 35 percent of profits shifted to tax havens come from the EU, according to the Atlas of the Offshore World.

European finance ministers have just reviewed and updated the EU's list of tax havens, which aims to promote good tax governance worldwide.

There are now 16 jurisdictions on the blacklist, as Antigua and Barbuda, Belize, and the Seychelles have been added, and the British Virgin Islands, Costa Rica, and the Marshall Islands have been removed.

"The list is toothless," Oxfam tax expert Chiara Putaturo commented after the publication. "It leaves off the hook zero-tax countries like the British Virgin Islands and fails to screen countries like the US and the UK along with EU tax havens like Luxembourg and Malta".

The blacklist is updated twice a year by the council. It already included countries such as Russia, Bahamas, Palau, Fiji or Panama, which are not cooperating with the EU or have not fully met their commitments to implement the necessary reforms.

"It's an insult to ordinary people struggling with soaring bills while the super-rich and profit-hungry multinationals get a free pass to escape their tax obligations," Putaturo commented.

In 2021 and 2022, 722 mega-corporations made $1 trillion a year in windfall profits, according to a recent analysis conducted by the NGO.

In contrast, one billion workers in 50 countries took a $746bn real-term pay cut last year.

US backs EU windfall tax on frozen Russian assets

In her strongest wording yet, US secretary Janet Yellen said she supported a European proposal to use the hundreds of billions of seized Russian assets currently held by G7 countries.

EU report tests targeting tax cuts at low-paid

The EU Commission report analysed a series of hypothetical reforms to the tax systems of Austria, Hungary, Italy, Belgium and Spain, and found targeted measures have a greater impact on labour supply than across-the-board cuts in personal income tax.

Commission and MEPs clash over corporate tax-reporting rules

The scope of the 2021 corporate tax transparency directive is a major point of contention between the EU Commission, which wants to maintain what has already been agreed, and MEPs, who are calling for member states to go further.

EU public procurement reform 'ineffective', find auditors

The EU Commission reformed procurement directives to make bids more attractive (and competitive), but the reform has failed, say auditors. Procedures now take longer, and the number of direct awards and individual tenders has increased over the past decade.


What are the big money debates at COP28 UN climate summit?

The most critical UN climate conference (COP28) ever will run from Thursday to mid-December — with talks on climate commitments and climate finance expected to determine the success of this year's summit.

Latest News

  1. Afghanistan is a 'forever emergency,' says UN head
  2. EU public procurement reform 'ineffective', find auditors
  3. COP28 warned over-relying on carbon capture costs €27 trillion
  4. Optimising Alzheimer's disease health care pathways across Europe
  5. Georgian far-right leader laughs off potential EU sanctions
  6. The EU's U-turn on caged farm animals — explained
  7. EU-China summit and migration files in focus This WEEK
  8. COP28 debates climate finance amid inflated accounting 'mess'

Stakeholders' Highlights

  1. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  2. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  3. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  4. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?
  5. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  6. UNOPSFostering health system resilience in fragile and conflict-affected countries

Stakeholders' Highlights

  1. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  2. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch
  6. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations

Join EUobserver

Support quality EU news

Join us