The ongoing debate on tax ahead of the UK general election fails to address the “elephant in the room”, writes Fernanda Balata. A global minimum tax on the wealth of the world’s roughly 3,000 billionaires – as proposed by the Brazilian presidency of the G20 this year – could raise close to £200 billion in revenues to help address the climate and cost of living crises.
There is nothing new about asking the question: “who should bear the greatest tax burden?” Yet the issue of tax fairness is far from any of the main UK political parties’ manifestos.
We’ve heard a lot about the state of our economy so far in this election and it’s not hard to see why. The UK is living with the consequences of decades of economic failure, with successive governments refusing to invest in people, crumbling schools and hospitals, or the national infrastructure that is vital for a thriving and sustainable economy.
This year, the Brazilian presidency of the G20 – the gathering of the twenty major global economies – has put a real solution on the table: a global minimum tax on the wealth of the super-rich. This would be a game-changer and offer a lifeline for countries to address massive domestic spending gaps, creaking public services and a lack of public trust.
Perpetuating a pervasive system
It is frustrating to hear politicians talk about tax by regurgitating well-rehearsed lines of “I understand life is tough at the moment”, while perpetuating a deceitful notion: that the only solution to address the UK’s investment challenge is to consider taxing the millions of people who are already forced to choose between heating their homes or putting food on the table.
By avoiding the topic of wealth inequality, let alone any commitment to taxing the wealth of the super-rich, politicians are perpetuating a pervasive system. Over a century ago, John Ruskin stated that “… the art of becoming ‘rich,’ in the common sense, is not absolutely nor finally the art of accumulating much money for ourselves, but also of contriving that our neighbours shall have less.”
In other words, by choosing to give the super-rich in society – those who have more than what they need to live a plentiful life – lower tax rates than the ordinary citizen, leaders are directly responsible for creating and sustaining systemic inequalities that are tearing apart communities across the country.
In the UK, the richest 1% own the same wealth as 80% of the population, or 53 million people
According to Oxfam, the world’s five richest men have more than doubled their total wealth since 2020, to $869 billion. In the UK, meanwhile, The Equality Trust has estimated that the richest one percent of people own the same wealth as 80 per cent of the population, or 53 million people.
Delivering a real solution to make the tax system fairer
The Brazilian proposal at the G20 is for a 2% global minimum tax on the wealth of the 3,000 or so people in the world who have at least $1 billion in assets. That would generate $250 billion per year – half of the annual revenue estimated to be needed for climate action in developing countries. Looking ahead, Oxfam has estimated that if such a tax were raised to 5%, it could bring in nearly $1.5 trillion a year.
There would also be positive knock-on effects: a global minimum tax on the wealth of the super-rich would strengthen international cooperation towards tax justice and help to create a level playing field for countries to make domestic changes. A new UK government would have an easier and more politically viable job of implementing wealth taxes nationally, with the global minimum tax acting as a “tax of last resort” if the wealthiest amongst us decided to use evasion or avoidance mechanisms.
A global wealth tax on the super-rich would make it easier for a new UK government to implement wealth taxes nationally, with the global minimum tax acting as a “tax of last resort”
Crucially, increasing the tax rate for billionaires would create incentives for rich people to spend more rather than pursue unlimited wealth accumulation. It is therefore a no-brainer in making our economy not only fairer but also more prosperous. And people like the idea. Surveys show that when asked about supporting a more progressive tax system, 70 to 80 per cent of people express strong approval.
UK leaders have an unprecedented chance to mend an unfair system that has proven over and over again that it does not support a thriving economy. As the New Economics Foundation has argued, whoever forms the next government cannot be afraid to invest in our homes, schools, hospitals; in our coastline, rivers, and land; in our children and workers. Unless they do so, our economy will never improve.
Securing thriving places and a sustainable cost of living for people are the very fundamentals of what politicians should offer. To do so, it’s critical that the tax system is radically updated for the times we live in.
All articles posted on this blog give the views of the author(s). They do not represent the position of LSE Inequalities, nor of the London School of Economics and Political Science.
