Gabriel Zucman, former academic at the University of California (Berkeley), is director of the International Tax Observatory in Paris. He is the ideologue behind the 2% global minimum tax on the ultra-rich with assets exceeding $1 billion, which would affect 3,000 people worldwide. This interview took place on the occasion of the Global Progressive Mobilisation which kicked off yesterday in Barcelona.
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Fiscal migration
The richest must continue to be taxed after they have left”
Can a country apply a tax to billionaires alone?
Yes, and successfully. Because the main risk, when trying to do it alone, is the risk of migration, of tax exile for the richest. But today there is a solution: the richest must continue to be taxed after they have left. Let’s say Spain implements it, right? This minimum tax is applied to the super-rich and they flee abroad. They go to Switzerland, they go to the Cayman Islands. They have the right to do so, but Spain would continue to collect the minimum tax for a few years after they have left. Let’s say for 10 years. And that is a decision any country can make. Today, if you have spent your whole life in Spain and you move and become a millionaire, the tax agency stops collecting taxes from you immediately. It is impossible to justify this system. Because if you become ultra-rich, it is largely because you have benefited from public spending, infrastructure, education, and healthcare in the country where you previously resided. There is no right to become a billionaire and then pay no taxes anywhere. So if your new country does not tax you, that is its right. But there must be a safety mechanism. The country where you amassed your fortune must intervene and say: ‘We will collect the taxes that your new country decides not to collect’.
Does it make sense to tax the rich if tax havens are not eliminated first?
This aspect has historically been a big problem when there was total bank secrecy in tax havens. But there has been an important evolution since 2018, which is the automatic exchange of banking information. So now it is much more difficult for people to hide assets because banks in tax havens are supposed to send every year all the information they have about their clients, their assets, and the income they obtain. It is a radical change.
But the amount that would be collected with this new tax figure is a reduced amount. Nor will the welfare state be financed with this proposed tax.
The most recent calculations estimate revenues of $400 billion, equivalent to 0.4% of global GDP. You are right: it is not enough to cover all our needs in terms of health, education, energy transition, etc. That is undeniable. We are not going to solve all our problems thanks to billionaires, but it will be very difficult to ask other population groups to pay more taxes while billionaires pay so little. The middle and upper-middle class already suffer high tax rates in Catalonia, Spain, and Europe.
Is it not known how much the rich actually pay?
This opacity has begun to dissipate in the last four or five years, because an international research effort has been carried out. We now have studies in about 10 countries. It has been shown that everywhere the super-rich pay, in proportion to their income, only half in taxes compared to other social groups. Nobody can accept a situation where the richest pay less. Taxing billionaires is necessary, it is a matter of equality before the law. The current tax system is anomalous. There are many surveys that highlight support of between 80 and 90% of the population for this measure.
But some critics, such as Nobel laureate Philippe Aghion, fear that taxing wealth will harm innovation.
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2% on wealth is a very modest figure in a context where the wealth of billionaires worldwide has increased by around 10% per year over the last four decades. Nothing would change for this group. They would continue to do what they do, and that will not deter anyone from innovating or creating a company.
In Spain, there is a wealth tax only in certain communities and with a lower threshold, starting from 500,000 euros.
In general, the wealth tax experiment in Europe is not convincing. The biggest problem is that, in practice, the super-rich do not pay it. Because in all these taxes there are exemptions for company shares, family businesses, and closely held businesses. As in Spain, if you own more than 5% of a company or 20% together with members of your family, then that wealth is exempt from wealth tax. Precisely when the wealth of the super-rich consists of just that, owning many company shares.
What do you propose?
What I would do is complement the existing wealth tax in Spain, in the sense that those who have 100 million euros or more in assets pay at least 2%. That will affect the vast majority of them, because the effective rate they pay today is around 0.3%. This expanded group today barely pays taxes on their real income thanks to tax avoidance and corporate structures.
In Madrid, this tax is absent as it is fully subsidized.
When we talk about its implementation, it would be best if these taxes had no geographical exemptions, but were applied everywhere. Nobody wants to find themselves in a situation where they can avoid the tax simply by moving to another region. There must be a government that is the tax collector of last resort.
What if the rich cannot be made to pay more?
The main risk is that the oligarchic drift we are witnessing globally, especially in the United States, will accelerate. Their wealth grows faster than everyone else’s, because it is much easier to accumulate wealth when you don’t have to pay taxes, as a snowball effect occurs. And, as their wealth increases, their power grows enormously. Extreme wealth is always extreme power, including the power to influence policies and elections, so there is a plutocratic spiral that we must break. This will be the decisive battle of the 21st century: between democracy and oligarchy.
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