After some debate, G20 finance ministers have agreed to continue discussing a proposed global wealth tax. Following a two-day meeting in July, their joint declaration stated: “With full respect for tax sovereignty, we will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.” While this doesn’t constitute an immediate victory, it is a significant coup for advocates of the tax. This commitment keeps the conversation alive and paves the way for potential breakthroughs in global tax reform.
Brazilian President Luiz Inacio Lula da Silva, holding the G20 presidency this year, presented a much-lauded proposal for a global wealth tax on billionaires at a meeting of the group’s finance ministers last month. The plan proposes a 2 percent minimum tax on the wealth of around 3,000 of the world’s richest individuals, aiming to close tax loopholes and, in turn, potentially raise $250 billion annually. Despite initial support from France, Spain, Colombia, Belgium, the African Union and South Africa, the plan also faced significant challenges. Germany dismissed it as “irrelevant,” and U.S. Treasury Secretary Janet Yellen voiced skepticism. Yet, the recent commitment to further discussions leaves the door open for forward movement.
There has been a surge in proposals for global wealth taxes in recent years, driven by growing public dissatisfaction with wealth disparities and the exploitation of tax loopholes. While the world’s richest 1 percent possess more than twice the wealth of 6.9 billion people, nearly half the global population struggles to survive on less than $5.50 a day. According to Oxfam, the top 1 percent saw their fortunes increase by $40 trillion over a decade while taxation rates fell to historic lows. The Tax Justice Network reports that global tax avoidance costs governments $427 billion annually. Meanwhile, some governments resort to lethal force against protesters opposing crippling tax burdens.
The urgency to rethink global wealth distribution has never been more critical, driven by global conflicts, pandemics and worsening climate change, all of which create and exacerbate humanitarian crises that require major sources of funding to respond adequately to. The pressing need to mitigate the climate crisis, for example, has intensified the search for new revenue sources. The United Nations estimates that $2.4 trillion must be invested annually in the global energy system until 2035 in order to keep average global temperature increases below 1.5 degrees Celsius.
The total current global climate finance needs are even greater. Current spending on recovery from extreme weather events, adaptations to the effects of climate change and mitigation measures like the energy transition comes to about $1.3 trillion per year, as of 2021-22. That’s far short of the estimated $8.5 trillion needed per year until 2030 and more than $10 trillion needed per year from 2030 to 2050. Equitable tax reforms could bridge this financial gap, but implementing and enforcing them effectively will require strong international cooperation and political will.
The Brazil-led proposal for a global billionaire tax has garnered attention and endorsement to address this issue, but it is also part of a long line of global tax proposals that have failed to gain traction. So what can advocates of the proposal do to keep it from the graveyard of global tax proposals? Although only partially implemented, the global tax deal agreed to by the members of the Organization for Economic Cooperation and Development, or OECD, in 2021 offers valuable lessons on the importance of international cooperation, securing early commitments, and building on incremental progress that can be used as a model for the G20 global billionaire tax proposal.
Although some may lament the absence of a more concrete agreement on the G20 tax proposal, the current consensus offers a unique opportunity to catalyze action and momentum.
The OECD agreement is made up of two pillars. Pillar One aims to redistribute corporate taxation by reallocating tax revenues from where companies are headquartered to where their consumers are. Pillar Two sets a minimum corporate tax rate. So far, only the second pillar has gained traction—38 jurisdictions have adopted its provisions—but the agreement has still achieved significant success, by generating a projected $220 billion of additional tax revenue and paving a way to narrowing tax loopholes through international taxation. The European Union leads the efforts to implement the corporate minimum tax, and U.S. President Joe Biden is actively pushing for Pillar One’s implementation, as he did during a meeting with French President Emmanuel Macron in June. Overall, 139 jurisdictions support the OECD agreement, showcasing its broad appeal.
However, there are also lessons to be learned from the challenges faced by the OECD global tax agreement. In the United States, for instance, Congress has so far failed to pass any legislation in line with either of the pillars, passing instead different rules included in the 2017 Tax Cuts and Jobs Act and the 2022 Inflation Reduction Act. The Republican Party, which holds a majority in the House of Representatives, has been particularly hostile to Pillar One.
The incremental successes of the OECD’s two-pillar solution underscore the importance of initial commitments and early achievements. Advocates of the G20 global billionaire tax proposal should focus on securing initial commitments and demonstrating early successes. By showcasing how a 2 percent wealth tax on the super-rich can generate substantial revenue, the proposal can build momentum and broader support. Leveraging international cooperation and setting clear, achievable goals can help overcome resistance. Crucially, a detailed roadmap for future negotiations is essential. Incremental progress, backed by strong advocacy and evidence of success, can pave the way for comprehensive reforms.
While these are not easy tasks, several factors can help propel the G20 proposal forward. One key advantage is its broad focus, addressing multiple issues rather than a singular one. This comprehensive approach enhances its appeal and potential impact by simultaneously tackling wealth inequality, funding climate action, and boosting global economic stability.
Although some may lament the absence of a more concrete agreement on the G20 tax proposal, the current consensus offers a unique opportunity to catalyze action and momentum. The upcoming G20 Leaders’ Summit in November presents a prime occasion to build on this progress. With South Africa taking over the G20 presidency for the coming year, the drive for meaningful reform can continue unabated. This transitional period is ripe for advocates to push for substantial advancements, ensuring that momentum is not lost but rather intensified.
Critically, it will become increasingly difficult for the Global North to ignore the calls for such a plan. As economic disparities widen and the climate crisis escalates, the pressure from developing economies and global advocates will intensify. This proposal is not just about fairness, it is about necessity. The Global North, which has often resisted such measures, will face mounting scrutiny and a moral obligation to support equitable solutions. This moment demands strategic collaboration and decisive action, and with a clear roadmap and commitment, a G20 global billionaire tax could initiate a more just and sustainable global economy, compelling even the most reluctant to take notice.
Heela Rasool-Ayub is the Director of Planetary Politics at New America. Previously, she served as a Foreign Service Officer with the U.S. Agency for International Development, where she led programs focused on Democracy, Human Rights, and Governance.
Aleksandar Kostić was a Research Fellow with Planetary Politics at New America, and is a PhD candidate in Anthropology at Princeton University. His research is primarily on environment protection in Central Asia, and its relations with the global climate change adaptation and mitigation strategies.