Introducing 2% minimum wealth tax would boost this by about $214 billion, as per the report.
Billionaires should face a minimum tax rate, a new report suggested after it found that some of the world's mega-wealthy people are paying little to no tax. Researchers at the European Union (EU) Observatory said that most people pay a higher tax rate than the super-rich, who, according to them, are able to use complex business structures for avoidance. They suggested a minimum 2% tax rate on billionaires' global health would raise $250 billion a year.
According to the report, there are around 2,500 billionaires worldwide with a combined wealth of $13 trillion. Therefore, the researchers said the number of taxpayers affected by this proposal would be "very small" and they would be paying a "very modest" tax rate.
"Even so, the revenue potential is large, due to the concentration of wealth at the top of the distribution and the low current tax rates of billionaires," the researchers wrote in the report.
The EU Tax Observatory is a research laboratory co-funded by the European Union and based at the Paris School of Economics. According to the BBC, Its researchers said that the automatic sharing of the wealthy's account information across more than 100 countries had significantly reduced offshore tax evasion. However, they also added that billionaires are still able to get away with paying tax rates equal to 0% or 0.5% of their wealth "due to the frequent use of shell companies to avoid income taxation".
The researchers commended an agreement in 2021 between 140 different countries to make sure companies pay at least 15% in corporation tax, but they also said that the plan had been "dramatically weakened" since then by a "growing list of loopholes".
Currently, the world's billionaires collectively pay around $44 billion a year in individual income taxes and wealth taxes, the researchers wrote. Introducing a 2% minimum wealth tax would boost this by about $214 billion, they estimated.
"It is time to establish a global minimum tax on the very rich," Joseph Stiglitz, an economist, scholar, and Nobel Prize winner, wrote in the report, adding, "This may seem impossible to attain, but so was undermining bank secrecy and introducing a minimum tax on corporations just a few years ago."
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Further, citing previous studies, the researchers said that billionaires have "very low" individual income taxes and wealth taxes. "When expressed as a fraction of income and considering all taxes paid at all levels of government beyond personal taxes ... the effective tax rates of billionaires appear significantly lower than those of all other groups of the population," they wrote.
The researchers also explained the reason why billionaires generally have low effective tax rates. According to them, billionaires in many countries use personal wealth-holding companies to distribute dividends and avoid paying income taxes.
"So many people struggle to make ends meet yet pay the taxes their governments ask of them," Mr Stiglitz continued. "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. Glaring tax disparity undermines the proper functioning of our democracy; it deepens inequality, weakens trust in our institutions, and erodes the social contract," he added.
Other measures that the researchers called for included increasing the minimum corporate tax rate to 25% and removing loopholes from it, creating a global asset registry, and introducing mechanisms to tax wealthy people who have been long-term residents in a country and move to a low-tax country.