A rallying cry India will find hard to ignore

A proposal for a new global deal to tax the world’s ultra-rich individuals is gaining momentum.

Brazil has fired up the G20 with a sharp focus on wealth inequality within a few months of taking the presidency of the influential grouping from India in December. Led by Brazil and endorsed by several other countries, notably France, Germany, South Africa, and Spain as well as by the International Monetary Fund (IMF0, the agenda has gained momentum and become a rallying cry that India will find hard to ignore. On July 10, 19 former Heads of State and Government wrote a letter to G20 leaders calling upon them to back the Brazilian G20 presidency’s proposal for a new global deal to tax the world’s ultra-rich individuals. 

“We, as former leaders, recognise a rare strategic opportunity when we see one. Taxes are the foundation of a civilised, industrious, and prosperous society. Yet our time is one in which the ultra-rich across the world pay a lower tax rate than teachers and cleaners. Billionaires, globally, are paying a tax rate equivalent to less than 0.5% of their wealth. Trillions of dollars that could have been productively invested in communities, education, health, and infrastructure have instead been unproductively accumulated by the ultra-wealthy,” wrote the former heads of Costa Rica, Chile, the Netherlands, Latvia, Canada, New Zealand, Australia, Spain, Lithuania, Austria, South Korea, Poland, Belgium, Sweden, Greece, Spain, Slovenia, and France.

This is a speedy and sharp uptake for a plan that began in New Delhi, where delegates heard Brazilian President Luiz Inácio Lula da Silva say in September: “If we want to make a difference, we have to put the reduction of inequalities at the centre of the international agenda.” With relentless attention to “issues that we need to stop avoiding and start addressing”, Lula later said: “It is no longer humanly possible for the world to be so wealthy, with so much money flowing across the Atlantic, and for so many people to be hungry.” 

The ‘Brazilian twist’, as it has been called, is in sharp contrast to the Indian G20 presidency, which closed with the New Delhi Leaders Declaration in September, a 37-page document where inequality is mentioned twice, without actionable steps. A 171-page e-book, ‘The Grand Success of G20 Bharat Presidency: Visionary Leadership, Inclusive Approach’, issued by The Research and Information System for Developing Countries which includes government functionaries as contributors also offers limited two mentions on poverty; one of them speaking only with respect to Africa.

In contrast, barely four months into the Brazilian presidency, the finance ministers of Brazil, Germany, South Africa, and Spain wrote a joint editorial in the Guardian to argue for higher taxes on the super rich as a key to battling global inequality and the climate crisis. The ministers asked that billionaires across international borders be made to pay a minimum 2% wealth tax as a step to “boost social justice and increase trust in the effectiveness of fiscal redistribution” and to “generate much-needed revenues for governments to invest in public goods such as health, education, the environment, and infrastructure — from which everybody benefits…”.

This tax is being pushed as a globally agreed and co-ordinated minimum to plug loopholes and fix the problem of tax avoidance by the superrich. Noted economist Gabriel Zucman of the Paris School of Economics and the University of California, Berkeley, who is advising the G20 on the proposal, wrote in the New York Times: ‘In liberal democracies, a wave of political sentiment is building, focused on rooting out the inequality that corrodes societies. A coordinated minimum tax on the superrich will not fix capitalism. But it is a necessary first step.’

This is the first time that the power of the G20, a grouping of 19 nations plus the African Union and the European Union, is being used to stir up discussions on a co-ordinated wealth tax proposal, building on the lines of a similar global corporate minimum tax rate agreed by the OECD that takes effect this year across 135 member jurisdictions. As the OECD puts it: ‘The Global Minimum Tax (GMT) represents a major step forward in international cooperation on the taxation of multinational enterprises (MNEs). It will ensure that MNEs with revenues above EUR 750 million are subject to a 15% effective minimum tax rate wherever they operate.’

This is also the first time that proposals on taxing the superrich are being endorsed by the IMF. IMF chief Kristalina Georgieva has been quoted as saying that closing tax loopholes and ensuring that the richest paid their fair share would mobilise funds urgently needed for sustainable and inclusive growth. In September, she asked Pakistan to increase taxes on the rich to protect the poor.

In India, the growing income and wealth inequality, now shown to be higher than it was at the time of India’s Independence, was a hot political topic that the Congress hammered home to telling effect during the election campaign, and the Bharatiya Janata Party (BJP) studiously avoided. The word ‘inequality’ itself appeared eight times in the 48-page Congress manifesto for the Lok Sabha elections. Most references talked about efforts to reduce wealth inequality, which was the theme of Rahul Gandhi’s campaign. In contrast, ‘inequality’ did not feature in the BJP’s 76-page manifesto.

The global focus on the topic of wealth inequality comes at a time when India is flooded with images of a star-studded multi-million dollar wedding of the son of Mukesh Ambani, the chairman of Reliance Industries Limited, reckoned to be the wealthiest man in India with a net worth estimated to be above $100 billion.  Long-running festivities culminated last week with the attendance at the wedding by the prime minister and several leaders from the opposition parties. Ahead of the wedding, RSS chief Mohan Bhagwat dropped by the Ambanis’ skyscraper home for dinner. The images sit in contrast to the emerging global resolve to fight inequality, and to curb the overreach of the superrich.

The Congress has correctly asked the prime minister to take a stand on the new G20 focus. Will India support the global minimum tax on the superrich, and thus be forced to introduce the provision in the Indian tax code? This is one global movement that will have important implications for Indian politics in the years ahead.

(The writer is a journalist and faculty member at SPJIMR. Views are personal) (Syndicate: The Billion Press)