‘Historic’ consensus of G20 finance ministers on taxing multinationals, super-rich

Brazil’s finance minister Fernando Haddad on Friday, 26 July, announced a historic consensus at the G20 on the taxation of large fortunes.

Notably, this is a key priority for Brazil’s president, Luiz Inacio Lula da Silva, who this year heads the G20 — a grouping of the world’s major economies, including the European Union and the African Union.

India’s finance minister, Nirmala Sitharaman, who presented the annual Union Budget on 23 July, skipped the meeting.

On 24 July, at the launch of an initiative to fight world hunger — another project that tops his G20 agenda — Lula had said:

Various experts and studies agree with the Brazilian president.

Global inequality has continued to widen in recent years, according to a study by the NGO Oxfam. In another press release on inequality published on Thursday, 25 July, Oxfam reiterated that the richest 1 per cent of the world have earned more than $40 trillion in a decade, but their taxation is at “historically” low rates.

French economist Gabriel Zucman, a consultant with the G20 on taxation issues, estimates that the tax rate for billionaires represents 0.3 per cent of their wealth.

In a report commissioned by the G20 earlier this year, Zucman had called for super-wealthy individuals, the 3,000 or so billionaires of the world, to be taxed the equivalent of 2 per cent of their fortune.

He had also argued in favour of taxing the centi-billionaires, those with a net worth of US$ 100 billion (or 100 billion euros or UK pounds), at a steeper rate. Countries needed to look at suitably taxing those who are not billionaires yet but are close to becoming one, he had argued.

Despite the seeming consensus, US treasury secretary Janet Yellen said during a media briefing that there was no need for a global agreement on taxing billionaires. International taxation was complicated and each country is best left to tackle taxation on their own, she held: “Tax policy is very difficult to coordinate globally, and we don’t see a need or really think it’s desirable to try to negotiate a global agreement on that.” Yellen did, however, emphasise that the US is “strongly supportive of progressive taxation”.

Brazil's economy minister Fernando Haddad, meanwhile, said that the "declaration" on Friday marked only a "first step". G20 members would "seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed", he added.

Brazil's search for a global agreement on taxing the richest of the rich is backed by France, Spain, South Africa, Colombia and the African Union. “Against the scepticism expressed by everyone since the beginning of the year, we have taken a first step,” Haddad said, adding that the finance ministers agreed it was necessary to include mention of this proposal in their declaration, so that the issue remains salient even after Brazil hands off the presidency to the next nation in turn.

“What has been initiated today is a broader process," Haddad added, "that will require the participation of academia, scholars and international organisations with experience in the subject, such as the OECD and the UN.”

France, Spain and South Africa — which will chair the G20 in 2025 — have already expressed their support, an official from the Brazilian ministry of finance told journalists.

An elated Gabriel Zucman, meanwhile, posted on X: 'A historic statement at the Rio summit today. There is now a consensus among G20 countries that the taxation of the super-rich must be fixed... Until February of this year, the taxation of the super-rich had never been discussed at the G20 — not once.'

'It is not easy to have all G20 finance ministers agree on anything,' Zucman acknowledged.

'Our proposal for a common minimum tax on billionaires is now on the map,' he added. 'G20 finance ministers have started to engage with it — and there is no going back.'

'10 years ago,' he wrote, 'the G20 acknowledged the rampant tax avoidance by multinational companies, giving the political momentum to address this issue — and in 2021, more than 130 countries and territories agreed on a common minimum tax on multinationals…

'We must get there for billionaires, too — and we will get there!

Of course, it is going to take time. These things don't get done in weeks or months….'

he added.