There are around 2,500 billionaires in the world right now, with a combined wealth of over £10 trillion. Just a fraction of that money is enough to, say, end global poverty, eradicate malaria and re-freeze the Arctic. Instead, a new report reveals billionaires are operating on the “border of legality” and getting away with paying the equivalent of 0 to 0.5 percent of their wealth in taxes. (For reference, those who don’t exploit legal loopholes pay between 20 and 50 percent tax.)
The new annual tax evasion report, from the EU Tax Observatory, found that the super-rich are using shell companies to avoid paying their fair share. These dedicated holding companies are created “with the purpose of avoiding the income tax”. The report also suggests a new minimum two percent tax on billionaires’ wealth – rather than income – would raise £205 billion a year.
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The new global tax would build on a 2021 agreement between 140 countries to impose a global minimum 15 percent tax on companies, a plan which has since been “dramatically weakened” by a “growing list of loopholes”, according to the EU Tax Observatory.
“This is the logical next step,” said Gabriel Zucman, the report’s leading economist. “It demonstrates that it is possible for countries to agree on minimum tax rates.”
A minimum rate is one of the most powerful tools to tackle tax-evasion loopholes, the report suggests, because it ensures the tax collected cannot fall below a set amount, no matter the avoidance measures used. The billions raised could help governments avert oncoming crises like future pandemics and extreme weather events driven by the climate crisis, and help fund services like education and transport infrastructure.
“Tax evasion, and, more broadly, tax avoidance, is not inevitable,” says Nobel prize-winning economist Joseph Stiglitz. “It is the result of policy choices – or the failure to make policy choices that act to stop it.”
“So many people struggle to make ends meet yet pay the taxes their governments ask of them,” Stiglitz adds. “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.”
