Originally published: May 2024
The global billionaire tax as proposed by Gabriel Zucman (https://lnkd.in/e98cPCjZ https://lnkd.in/eRpErDXu) has support from a lot of countries (Brazil, France, Germany, Spain, Netherlands), but it’s not clear how deep their love for the proposal is.
Once the idea starts being taken seriously, there’ll be pressure from global politics, tax technical challenges and lobbying. Lobbying probably matters little at this stage. As Zucman tries to gather support for a G20 statement in July, I expect that global politics is his main focus now and on the technical, he’ll just repeat what he said before (https://lnkd.in/eCy4HA8r https://lnkd.in/eCy4HA8r https://lnkd.in/e634hedX). But it’d be wrong to ignore tax technical hurdles. Here’s 5 of the most obvious problems.
Firstly, scope. There’s c. 3,000 billionaires. Can a billionaire split up their assets to spouse, children, etc, and stay below the threshold? What about donating and retaining the usufruct? Or put it in a trust or a charity? Look through and affiliate rules are likely complicated and risks taxing entire families as one (which is uncomfortable).
Secondly, there’s valuations. Zucman sold his plan claiming wealth is “well defined” but income is not. Cash is easy to value, property is harder (disputes on property taxes are common), shares and other securities even harder (fluctuate a lot). But billionaires own more hard to value assets (bespoke yachts, artworks, music, etc) even before we get to their personal brand. And Zucman’s tax requires a consistent tax base, meaning all countries need to agree on the value.
Thirdly, there’s credits for tax paid, deferred tax, averaging and losses of wealth, etc. As a tax based on wealth, losses appear impossible, but will that survive scrutiny?
Related to that (and fourthly), liquidity problems have not gone away.
Finally, who collects the tax? Zucman has suggested the residence state is uncontroversial, but then also suggested allocation based on asset location or even days spent in a country. He considers this “not the most important issue”, as a UTPR like “tax collector of last resort” rule ensures there’s no incentive to fiddle around with this. The question is likely divisive politically and even if agreed, it creates incentives for countries to lure tax base their way (eg through kickbacks). A workable rule will be hard, but it’s currently undefined.
None of these need to be fatal. Tax technical challenges can be overcome if there is a group of countries that love the idea enough that they are willing to compromise to take it forward. That is true for any tax reform (https://lnkd.in/ezh29kcM). So, it all comes down to: how deep is your love? (https://lnkd.in/euxfHFYr) Will the plan stay alive (https://lnkd.in/e7Vek9ww) or will it turn to tragedy (https://lnkd.in/eTqb835P)?
Obvious disclaimers: this is not advice. These views are my own and do not necessarily represent my employer.
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