South Africa and the African Union are among the G20 nations that have committed to collaborating to ensure that the super-rich pay their taxes, according to a Ministerial Declaration on International Tax Cooperation adopted following a meeting of finance ministers in Rio de Janeiro on Friday, 26 July, 2024.
This is the first time that an international standard for taxing individuals with over $1bn in total assets has been proposed.

The proposition on the table aims to ensure that these individuals pay a minimum level of tax on the value of their wealth, which includes assets such as real estate, investments, business interests, as well as personal assets like art, antiques, and collectibles.

Wealth tax proposal

The plan is to address the disparity between income tax and total wealth, reduce the incentive to shift profits to low-tax jurisdictions, and improve transparency in financial reporting to prevent tax evasion and avoidance. This includes enhanced reporting requirements for offshore holdings.

A report by French economist Gabriel Zucman, commissioned by Brazil, reveals that billionaires currently pay only about 0.3% of their wealth in taxes.

Implementing a 2% tax could generate between $200bn (€184bn) and $250bn (€230bn) annually from approximately 3,000 individuals. According to the report, these funds could be used to support public services like education and healthcare, as well as efforts to combat climate change.

“Billionaires have the lowest effective tax rate of any social group. Having people with the highest ability to pay tax paying the least – I don’t think anybody supports that," Zucman said.

Tax debate intensifies

The contentious issue of a minimum effective taxation standard for ultra-high-net-worth individuals was a major focus during the recent two-day meeting of finance ministers in Rio de Janeiro, which will host the next G20 summit in November. It is a top priority for Brazilian President Luiz Inácio Lula da Silva, who is leading this year's G20.

But while Lula had long been advocating for a minimum global tax on the wealthy, the final declaration signed reflects a subject that caused significant division among member states, Germany and the United States among them.

In April this year, German Finance Minister Christian Lindner rejected Brazil's proposal to tax the super-rich. He emphasised that Germany already had an appropriate system for taxing income, suggesting that the proposal was not suitable or necessary for their economic framework.

Furthermore, a decision has not been made on who will oversee the process.

The US supports the OECD (Organisation for Economic Co-operation and Development) as the host for this initiative, but campaigners argue that this group of predominantly wealthy countries is not trustworthy for the task. They prefer the broader and more inclusive United Nations to handle it.

As a result, an agreement on how the global wealth will be rolled out has not been reached.

Support for taxation

However, proponents of the tax remain optimistic about its potential. In support of the global wealth tax, Denmark's former finance minister Mogens Lykketoft points to successful precedents, such as the international standard for a minimum tax on large multinationals, which has seen widespread adoption.

"We have evidence that this can work; in 2021, 140 countries and jurisdictions agreed to an international standard for a minimum tax of 15% on the profits of large multinationals. Over 30 governments have now implemented the corporate tax," he said.

Reflecting this sentiment, a recent survey of 22,000 people across G20 countries, conducted by Earth4All, found that 68% support increased taxes on the wealthy, indicating strong public backing for such measures.

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Katja Hamilton