US rejects plan for G-20 deal to tax super-rich

RIO DE JANEIRO, Brazil - The United States sees no need to negotiate an international agreement on taxing the super-wealthy, US Treasury Secretary Janet Yellen said on July 25, highlighting divisions on a plan that is top of the agenda at a Group of 20 (G-20) finance ministers’ meeting in Rio de Janeiro.

Taxing the ultra-rich is a key priority of Brazil’s leftist president, Mr Luiz Inacio Lula da Silva, who this year heads the G-20 grouping of the world’s major economies, the European Union and African Union.

“Tax policy is very difficult to coordinate globally,” Dr Yellen told a press conference in Rio de Janeiro, ahead of an evening meeting between finance ministers to discuss the topic.

“We don’t see a need or really think it’s desirable to try to negotiate a global agreement on that. We think that all countries should make sure that their taxation systems are fair and progressive.”

Dr Yellen said Washington was “strongly supportive of progressive taxation, and making sure that very wealthy, high-income individuals pay their fair share.”

She highlighted policies proposed by US President Joe Biden, such as a billionaires’ tax, which she described as “a very worthwhile initiative.”

“It makes sense for most countries to take this approach of progressive taxation.”

‘Delicate mechanism’

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.

“Some individuals control more resources than entire countries,” Mr Lula said on July 24, at the launch of an initiative to fight world hunger, another project topping his G-20 agenda.

His finance minister, Mr Fernando Haddad, told local media on July 24 that taxing billionaires would help finance the fight against hunger but “it will not be established overnight, because it is a very delicate mechanism.”

Global inequality has continued to widen in recent years, according to a study by the NGO Oxfam published on July 25. The richest 1 per cent of the world have earned more than US$40 trillion (S$53 trillion) in a decade, but their taxation is at “historically” low rates, the study said.

French economist Gabriel Zucman, a consultant with the G-20 on taxation issues, estimates that the tax rate for billionaires represents 0.3 per cent of their wealth.

In a recent report commissioned by the G-20, he called for super-wealthy individuals to be taxed the equivalent of 2 per cent of their fortune.

Washington is not the only sceptic.

On the eve of the G-20 meeting, Germany’s finance ministry said it considers the idea of a minimum wealth tax to be “irrelevant.”

Divisions over Ukraine, Gaza

The meeting of finance ministers in Rio opened with a session on the global economy, as inflation slows in many parts of the world after a surge fuelled by the war in Ukraine and other factors.

On July 26, the ministers will tackle the financing of the climate transition and debt in their last meeting before a G-20 summit on Nov 18 and 19.

Founded in 1999, the Group of 20 assembles 19 of the world’s largest economic powers, as well as the European Union and the African Union.

The organisation was originally focused on global economic issues but has increasingly taken on other pressing challenges - even though member states do not always agree on what should be on the agenda.

Brazil’s presidency said in a statement that some members of the G-20 considered that crises such as the conflicts in Ukraine and Gaza “have an impact on the global economy and should be addressed at the G-20, while others believe that the G-20 is not the place to discuss these issues.”

Divisions within the G-20, of which Russia is also a member, have made drafting a joint communique at the outcome of meetings a challenge.

The last meeting of finance ministers in Sao Paulo failed to issue such a statement.

Brazil hopes to publish three texts after the meeting, said Ms Tatiana Rosito, a senior official at the country’s economy ministry.

Aside from a joint final communique, this would include a document on “international cooperation in tax matters” and a separate communique from Brazil on geopolitical crises.

“It is likely, based on my experience of previous G-20s,” that future ministerial-level meetings will publish separate statements in this manner, European Commissioner for International Partnerships Jutta Urpilainen told reporters on July 24.

Aiming for a single text “would not allow us to adopt anything,” she said. AFP