Former world leaders ask Biden and G-20 to approve global tax on the ultra-rich

All major international debates on tax matters must first go through the United States and, from there, continue on their way to other global economies such as Germany, France, Italy or Japan. For this reason, 19 former heads of state and government have written a letter asking U.S. President Joe Biden and other G-20 leaders to endorse a new proposal that would levy a special tax on the 3,000 richest people in the world, with the aim of raising up to $250 billion (about €231 billion) per year globally.

“Taxing the ultra-rich has strong popular support around the world and across political spectrums, including among the ultra-rich themselves. The G-20 leadership was vital to achieving a global agreement on a minimum corporate tax. Now is the time to do the same with the great fortunes,” reads the letter, to which EL PAÍS has had access. The signatories include Dominique de Villepin, Stefan Löfven, Jan Peter Balkenende, Yorgos Papandreou, Julia Gillard and Felipe González, former prime ministers of France, Sweden, the Netherlands, Greece, Australia and Spain, respectively. Michelle Bachelet, former president of Chile, Kim Campbell, former prime minister of Canada, and Alfred Gusenbauer, former chancellor of Austria, among others, also signed the letter.

The former political leaders explain in the document that the great fortunes of the world “pay a lower tax rate than teachers and cleaners.” At a global level, they argue, billionaires pay the equivalent of less than 0.5% of their wealth, which causes billions of dollars “that could have been productively invested in education, health or infrastructure” to have been “unproductively accumulated.” The result of this spiral is “extreme inequality,” a phenomenon that leads “too many people to feel that the social contract is broken and that their democracies have left them behind.” For all these reasons, the tax proposal is “strategic and necessary.”

A couple of weeks ago, the Brazilian presidency of the G-20 presented the conclusions of a report by the famous French economist Gabriel Zucman, director of the European Union Tax Observatory. The document proposes that people whose assets exceed $1 billion (about €935 million at the current exchange rate) pay at least 2% of their wealth each year, which would allow governments to raise $200-$250 billion per year globally.

The plan, according to Zucman himself, has already been supported by Spain, France, Brazil, South Africa, Colombia and Belgium, among others. But to make it viable, international leaders know well, a boost of oxygen from Washington and the rest of the capitals of the world’s largest economies would be very useful. “It is rare indeed to find a proposal that asks us to unite as former leaders and that we also recognize as politically possible. This one clearly is,” add the signatories in the letter, coordinated by Club of Madrid, the world’s largest forum of former heads of state and government, in collaboration with Oxfam Intermón.

Zucman’s plan proposes that people with a total wealth of more than $1 billion — including assets, real estates, equities, participation in companies’ ownership and more — pay a minimum amount of tax annually, equal to 2% of their wealth, as long as they are not already contributing that amount in personal income tax. The framework, as with the minimum global corporate tax of 15%, would also allow countries to apply last-resort mechanisms to demand the corresponding part of the tax in the event that other jurisdictions forgo the income.

The proposal is based on the idea that this 2% contribution should be calculated on wealth and not on income, since it is a value that is more difficult to manipulate and hide. In the baseline scenario, the additional collection for governments would be an average of more than $80 million per person among the 3,000 ultra-high-net-worth individuals called to pay the tax. If the framework were expanded to people with a net worth over $100 million, it would net an additional $100 billion to $140 billion a year; if the rate were 3%, the collection would range between $550 billion and $690 billion, of which 55% would come from billionaires.

Global coordination

In the letter, addressed to leaders such as Joe Biden, German Chancellor Olaf Scholz and the new Prime Minister of the United Kingdom, Keir Starmer, the signatories insist on the need for global coordination. To do this, they use the example of the new minimum global corporate tax of 15% for multinationals that has been agreed within the OECD framework.

“National action is essential. We need to tax the income of billionaires in each country,” urges the letter. However, they add, “national action alone can only go so far” because global capital does not respect national borders and tax evasion and avoidance by the ultra-rich “succeeds when governments do not work together.” For this reason, “we need global cooperation.”

Former world leaders acknowledge that they know firsthand what “the reality of political office” and its limitations are like, “including the pressures placed on them.” However, they ask the current leaders for global leadership for a new consensus on taxation. “We are ready to support you in this agenda.”

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