Call for taxing billionaires at 2% of their wealth to ensure those at the top are not forced out.

A global tax on billionaires’ wealth, rather than their income, could raise $250 billion, according to an EU-funded study.

An annual 2 percent tax on the wealth of the world’s 2,756 richest people could address the fact that billionaires actually pay far less in taxes relative to their income than ordinary citizens, using companies to collect their personal wealth and protect its offerings . from income tax, Global Tax Avoidance Report 2024.

According to a report by the EU Tax Observatory, too few serious efforts have been made to resolve the situation. It is estimated that effective wealth tax rates for the world’s richest remain very low, ranging from zero to 0.5 percent.

In 2022, $1 trillion of profits were transferred to tax havens, about 35 percent of which came from companies operating in the EU.

“Tax evasion, concealment of assets, transfer of profits to tax havens are not laws of nature. They are the result of political decisions or the failure to make certain decisions,” said Gabriel Zucman, co-author of the report.

The Observatory urged world leaders to use the next G20 summit in Brazil next year to begin discussions about introducing an annual tax of at least 2 percent on wealth rather than on the incomes of the world’s richest people.

The study found that while tax evasion by high-net-worth individuals remains significant, it has decreased due to the automatic exchange of banking information. “This success shows that rapid progress can be made in the fight against tax evasion if there is political will,” the report said.

Reducing tax evasion has become critical following the rise in public debt following the pandemic and the need to move to net zero tax, the report said.

The move follows an attempt to introduce a 15 percent global minimum tax on multinationals agreed by 140 countries in 2021 to curb the shifting of profits to tax havens.

It was estimated that it would increase corporate tax revenue by about 10 percent, but a number of loopholes “drastically weakened” the measure and lowered expected revenues.

Tax evasion – even in the gray area bordering legality – is becoming increasingly common in Germany. Financial assets may still be held but not reported, whether by banks or other financial groups that do not comply with rules or restrictions on information collection.

“Many offshore financial institutions are reasonably compliant, but others may not comply because they fear losing their customer base and facing credible threats from foreign tax authorities. Secondly, not all assets are covered by the automatic exchange of banking information,” the report says.

Real estate continues to be used to hide wealth from tax, for example by using shell companies to own luxury properties in cities such as London.

“This is the logical next step after a global minimum tax on multinational companies, showing that it is possible,” Zucman added.

“So many people are struggling to make ends meet while continuing to pay the taxes the government requires them to pay. We must ensure that those at the top of the income ladder, who clearly have the means, do not get away with this,” Nobel Prize-winning economist Joseph Stiglitz said of the results.

“Significant tax disparities undermine the proper functioning of our democracy; it increases inequality, weakens trust in our institutions and undermines the social contract,” Nobel Prize-winning economist Joseph Stiglitz said in the report’s foreword. “What we asked of corporations, we must now demand of billionaires. It’s time for a global minimum tax on the super-rich.”