In his book The Society of Equals, the leading French sociologist Pierre Rosanvallon identifies the rise of the global super-rich as inimical to a shared social order. “The secession of the wealthy,” writes Prof Rosanvallon, means that “the richest sliver of the population now lives in a world unto itself”.
Tax avoidance is perhaps the most obvious and resented way in which this “separatism” of the rich manifests itself. Whether through silting their money away in tax havens, or exploiting loopholes and using creative accounting, the world’s billionaires these days pay a far smaller proportion of their income to fund public goods than the rest of us. In the 1960s, the 400 richest Americans paid more than half their income in taxes. By 2018, it was less than a quarter.
At a time when governments around the world are struggling with high levels of debt, and facing dramatic challenges such as dealing with the consequences of the climate emergency, this crazy, upside down state of affairs should be seen as intolerable. Such glaring inequity undermines the bonds of reciprocity and trust that sustain healthy societies. But for too long reform has been judged too difficult and too complicated, despite being enthusiastically backed by voters.
Happily, there are signs that, at least at an international level, the political mood is shifting. In July, G20 finance ministers will discuss new proposals for an annual 2% global tax on the wealth of the world’s 3,000 or so billionaires. According to the French economist Gabriel Zucman, the architect of the plan, the wealth tax could raise $250bn a year – more than the recently established global minimum tax on corporations, and roughly the cost of the economic damage wrought by extreme weather events in 2023. Ahead of the G20, the governments of Brazil (which holds the presidency), France, South Africa and Spain have expressed support for Prof Zucman’s idea.
Despite such backing, the path to actually introducing such a tax is likely to be long and tortuous. Watertight criteria for assessing different types of wealth and assets would have to be worked out and, crucially, a way found to deal with non-participating tax jurisdictions. Prof Zucman believes neither of these problems to be insuperable; other sympathetic experts in the field have reservations. And as was the case with a proposed “Robin Hood” tax on financial transactions in the 2010s, there would inevitably be a ferocious resistance campaign on behalf of some of the world’s most powerful individuals.
None of that should prevent a necessary and overdue debate from beginning in earnest in Brazil next month. In the UK, the refusal by both main parties to contemplate wealth taxes flies in the face both of popular sentiment and the needs of the country, following the economic shocks of the pandemic and the war in Ukraine. But globally, the successful implementation of the minimum corporation tax suggests that an age in which footloose, mobile capital could please itself may be coming to an end.
States provide the healthcare, education and infrastructure that allow the very wealthy to make their money. Dodging the obligation to pay a fair share of the costs involved should not be an option. In seeking a declaration to that effect in July, Brazil will be doing the rest of the world a favour.
