The world’s top 3,000 wealthiest people should pay a 2 per cent levy on their total wealth, rather than their income, according to a think tank informing EU tax policy.
The EU Tax Observatory’s global tax evasion report said billionaires have long been using shell companies, often based in the Caribbean, to push the boundaries of how much tax they pay by moving dividends through holding companies designed to hoard profits.
“These holding companies are in a grey zone between avoidance and evasion,” the report said. “To the extent that they are created with the purpose of avoiding the income tax, they can legitimately be seen as closer to evasion.”
Loopholes mean the wealthiest pay the equivalent tax of anything up to 0.6 per cent on their total accumulated wealth.
By comparison, wealthy individuals who do not use shell companies or loopholes can pay up to 50 per cent of tax on their wealth.
The report also delved into how shell companies have been used to be stand in owners for properties in cities such as London.
“Real estate continues to provide ample opportunities for the rich to avoid and evade taxes,” the report said.
It warned that despite more than 100 countries exchanging bank information automatically, “no serious attempt has been made to address this situation, which risks undermining the social acceptability of existing tax systems”.
Over 100 researchers were used to gather data. The EU Tax Observatory is calling on global leaders to start talks on a 2 per cent levy on the world’s richest, which they hope can be done at the G20 summit in Brazil next year.
The research group also warned about the risks of large tax exemptions for green energy producers that could raise what it says as the same issues seen in standard tax competition.
“It depletes government revenues, and if not accompanied by egalitarian measures, it risks increasing inequality by boosting the after-tax profits of shareholders, who tend to be towards the top of the income distribution.”
Shafi Musaddique is a news editor at Alliance magazine.