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Monday, July 15, 2024


Canada should support G20 plan to tax billionaires

By co-operating, the world’s leading economies could curb the ability of the super-rich to play countries off against each other, and incentivize nations to tax their own billionaires.

When Chrystia Freeland was first appointed finance minister, her mandate letter from Prime Minister Justin Trudeau called on her to identify “additional ways to tax extreme wealth inequality.”

Presumably, this would have been a task she took up with gusto. After all, in her prepolitical days, she authored a book on wealth inequality that helped her establish herself as a would-be star in the Liberal Party.

However, four years into her role as finance minister, even as wealth inequality has exploded all around us, Freeland has yet to come up with a serious plan to tax Canada’s ultra-wealthy.

There’s no particular mystery about taxing the wealthy. It’s utterly doable, even extremely popular, with eye-popping levels of public support — close to 90 per cent.

Even some wealthy people support it, as Claire Trottier, a self-described member of Canada’s 1 per cent, noted in an eloquent piece in the Toronto Star last week. 

Sadly, however, this is not the norm. The wealthy resist taxes fiercely, threatening to leave and take their capital out of any country taxing them.

Their threats to depart — amplified by their acolytes in think tanks, investment houses and the business press — have intimidated governments, which have responded in recent decades by competing with each other to lower taxes on the rich in a “race to the bottom.”

This has left the world’s billionaires paying almost no tax — 0 to 0.5 per cent of their wealth — thereby depriving countries (including Canada) of revenue that has been made up by those unable to just sail off in their yachts.

But something has just happened that could change this power dynamic. In an unprecedented development, the G20 has announced it is exploring the idea of co-ordinating efforts to ensure the world’s billionaires pay annual taxes worth at least 2 per cent of their wealth.

Under this bold initiative, launched by Brazil in its current role as G20 president, an individual member country would collect a minimum of 2 per cent of the wealth of each of its billionaires, either through its income tax or an additional wealth tax. If a country failed to collect that amount from a billionaire, there would be a mechanism for the shortfall to be collected and shared among other G20 countries.

By co-operating like this, the world’s leading economies could curb the ability of the superrich to play countries off against each other, and incentivize nations to tax their own billionaires rather than losing the revenue to other G20 nations.

Wealth taxes have been advocated before — in the U.S. by Senators Bernie Sanders and Elizabeth Warren and in Canada by NDP leader Jagmeet Singh. But this is the first time that a tax aimed at the superrich has been brought to the negotiating table of a body that represents the world’s largest economies, accounting for 80 per cent of global GDP.

The G20 proposal could raise a total of $250 billion a year in additional revenue for member countries, and could be extended beyond billionaires to centimillionaires and decamillionaires. Even without a full G20 consensus, it could be implemented through coalitions of nations, according to renowned French economist Gabriel Zucman, who has been commissioned by the G20.

Zucman, an expert on wealth inequality who heads the EU Tax Observatory, points out that international co-operation has led to “a real breakthrough” in clamping down on tax evasion over the past decade. Tough new bank reporting laws have significantly reduced tax evasion by the wealthy, he says, showing what’s possible “if there is political will.”

Freeland has rejected the NDP’s plan for a wealth tax, but the G20 is now proposing a group plan that would have fewer political risks. With France already keenly supportive, the plan has the enormous upside of raising badly-needed revenue while tackling the scourge of ever-growing inequality and domination by the wealthy.

It’s a plan Freeland should support, even enthusiastically champion. It could be her breakthrough moment.

Linda McQuaig is a Toronto-based freelance contributing columnist for the Star. Follow her on Twitter: @LindaMcQuaig.

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