Gabriel Zucman

This report presents a proposal for an internationally coordinated standard ensuring an effective taxation of ultra-high-net-worth individuals. In the baseline proposal, individuals with more than $1 billion in wealth would be required to pay a minimum amount of tax annually, equal to 2% of their wealth. This standard could be flexibly implemented by participating countries through a variety of domestic instruments, including a presumptive income tax, an income tax on a broad notion of income, or a wealth tax. The report presents evidence that contemporary tax systems fail to tax ultra-high-net-worth individuals effectively, clarifies the case for international coordination to address this issue, analyzes implementation challenges, and provides revenue estimations. The main conclusions are that (i) building on recent progress in international tax cooperation, such a common standard has become technically feasible; (ii) it could be enforced successfully even if all countries did not adopt it, by strengthening current exit taxes and implementing “tax collector of last resort” mechanisms as in the coordinated minimum tax on multinational companies; (iii) a minimum tax on billionaires equal to 2% of their wealth would raise $200-$250 billion per year globally from about 3,000 taxpayers; extending the tax to centimillionaires would add $100-$140 billion; (iv) this international standard would effectively address regressive features of contemporary tax systems at the top of the wealth distribution; (v) it would not substitute for, but support domestic progressive tax policies, by improving transparency about top-end wealth, reducing incentives to engage in tax avoidance, and preventing a race to the bottom; (vi) its economic impact must be assessed in light of the observed pre-tax rate of return to wealth for ultra-high-net-worth individuals which has been 7.5% on average per year (net of inflation) over the last four decades, and of the current effective tax rate of billionaires, equivalent to 0.3% of their wealth.

This paper reviews recent developments in the theory and practice of optimal capital taxation. We emphasize three main rationales for capital taxation. First, the frontier between capital and labour income flows is often fuzzy, thereby lending support to a broad-based, comprehensive income tax. Next, the very notions of income and consumption flows are difficult to define and measure for top wealth holders where capital gains due to asset price effects dwarf ordinary income and consumption flows. Therefore the proper way to tax billionaires is a progressive wealth tax. Finally, as individuals cannot choose their parents, there are strong meritocratic reasons why we should tax inherited wealth more than earned income or self-made wealth for which individuals can be held responsible, at least in part. This implies that the ideal fiscal system should also include a progressive inheritance tax, in addition to progressive income and wealth taxes. We then confront our prescriptions with historical experience. Although there are significant differences, we argue that observed fiscal systems in modern democracies bear important similarities with this ideal triptych.

Over the last 10 years, governments have launched major initiatives to reduce international tax evasion. Yet despite the importance of these developments, little is known about the effects of these new policies. Is global tax evasion falling or rising? Are new issues emerging, and if so, what are they? This report addresses these questions thanks to an unprecedented international research collaboration building on the work of more than 100 researchers globally.

Today’s tax systems, in which value‐added taxes and payroll taxes play a prominent role, are largely creations of the 1950s. We need to invent modern tax systems adapted to the reality of the 21 st century: the growing importance of capital and the rise of inequality. This article reviews some of the challenges involved with increasing the progressivity of tax systems in a globalised world and discusses how these challenges could be overcome. I make the case for new and more ambitious forms of international cooperation and for modern forms of wealth taxation.

Le rapport sur les inégalités mondiales 2022 propose une radiographie inédite des inégalités mondiales, avec la présentation des dernières données sur les écarts de revenu et de patrimoine à travers le monde, ainsi que de nouveaux résultats sur les injustices liées au genre et les inégalités environnementales. Ce travail, mené par une équipe de chercheurs franco-américains et reposant sur les efforts d’une centaine d’économistes à travers le monde, démontre avec force que les inégalités extrêmes qui caractérisent nombre de nos sociétés sont le résultat de choix politiques et n’ont rien d’une fatalité.

This article first describes the main developments in measuring the upper tail of the income and wealth distributions over the last twenty years. Second, it points out some of the key methodological challenges and how better data could address them. Third, it discusses the academic and policy impacts of upper tail measurement.

This study estimates how much tax revenue the European Union could collect by imposing a minimum tax on the profits of multinational companies. We compute the tax deficit of multinational firms, defined as the difference between what multinationals currently pay in taxes, and what they would pay if they were subject to a minimum tax rate in each country. We then consider three ways for EU countries to collect this tax deficit. First, we simulate an international agreement on a minimum tax of the type currently discussed by the OECD, favored by a number of European Union countries, and by the United States. In this scenario, each EU country would collect the tax deficit of its own multinationals. For instance, if the internationally agreed minimum tax rate is 25% and a German company has an effective tax rate of 10% on the profits it records in Singapore, then Germany would impose an additional tax of 15% on these profits to arrive at an effective rate of 25%. More generally, Germany would collect extra taxes so that its multinationals pay at least 25% in taxes on the profits they book in each country. Other nations would proceed similarly. We find that such a 25% minimum tax would increase corporate income tax revenues in the European Union by about €170 billion in 2021. This sum represents more than 50% of the amount of corporate tax revenue currently collected in the European Union and 12% of total EU health spending. The revenue potential of a coordinated minimum tax is thus large. However, revenues significantly depend on the commonly agreed minimum tax rate. With a 21% minimum rate, the European Union would collect about €100 billion in 2021. Moving from 21% to 15% would reduce the potential revenue by a factor of two to about €50 billion. Second, we simulate an incomplete international agreement in which only EU countries apply a minimum tax, while non-EU countries do not change their tax policies. In this scenario, each EU country would collect the tax deficit of its own multinationals (as in our first scenario), plus a portion of the tax deficit of multinationals incorporated outside of the European Union, based on the destination of sales. For instance, if a British company makes 20% of its sales in Germany, then Germany would collect 20% of the tax deficit of this company. We find that that in such a scenario, using a rate of 25% to compute the tax deficit of each multinational, the European Union would increase its corporate tax revenues about €200 billion. Out of this total, €170 billion would come from collecting the tax deficit of EU multinationals; an additional €30 billion would come from collecting a portion of the tax deficit of non-EU multinationals. For the European Union, there is thus a much higher revenue potential from increasing taxes on EU companies than from taxing non-EU companies. To improve the fairness of its tax system and generate new government revenues (e.g., to pay for the cost of Covid-19), it is essential that the European Union polices its own multinationals. Last, we estimate how much revenue each EU country could collect unilaterally, assuming all other countries keep their current tax policy unchanged. This corresponds to a “first-mover” scenario, in which one country alone decides to collect the tax deficit of multinational companies. This first mover would collect the full tax deficit of its own multinationals, plus a portion (proportional to the destination of sales) of the tax deficit of all foreign multinationals, based on a reference rate of 25%. We find that a first mover in the European Union would increase its corporate tax revenues by close to 70% relative to its current corporate tax collection. Although international coordination is always preferable, a unilateral move of a single EU member state (or a group of member states) would encourage other EU countries to also collect the tax deficit of multinationals—as not doing so would mean leaving tax revenues on the table for the first movers to grab. This could pave the way for an ambitious agreement on a high minimum tax, within the European Union and then globally. This analysis shows that unilateral action can play a transformative role and that refusing international coordination is not a sustainable solution, since other countries can always choose to collect the taxes that tax havens choose not to collect. Our estimates are based on a transparent methodology that combines newly available macroeconomic data on the location and effective tax rates of multinational profits. We illustrate and validate our approach by applying it to firm-level data publicly disclosed by all European banks and 16 large non-bank multinationals. We find that European banks would have to pay 41% more in taxes if they were subject to a 25% country-by-country minimum tax. This estimate is in line with our finding that EU multinationals as a whole (all sectors combined) would have to pay around 50% more in taxes, thus suggesting that this number is indeed the correct order of magnitude. Companies such as Shell, Iberdrola, and Allianz—who voluntarily disclose their country-by-country profits and taxes—would also have to pay 35%-50% more in taxes if they were subject to a 25% minimum tax. This report is supplemented by a pioneering interactive website, https://tax-deficitsimulator.herokuapp.com. This new tool allows policy makers, journalists, members of civil society, and all citizens in each EU country to assess the revenue potential from minimum taxation on both domestic and foreign firms. Users can select various scenarios (e.g., international coordination or unilateral action), and a full range of minimum tax rates from 10% to 50%. All the data and computer code are available online, making our estimates fully reproducible. We plan to regularly update our findings, as improved and more comprehensive macroeconomic data sources become available, refined estimation techniques are designed, and more companies publicly disclose their country-by-country reports.