Gabriel Zucman (Paris, 37 years old) is as didactic as he is direct. “The way we tax the rich and multinational corporations is not sustainable,” he says. A student of Thomas Piketty, winner of the prize for the best young economist in France, professor at Berkeley and at the Paris School of Economics, his research focuses on the accumulation, distribution and taxation of global wealth and has become a reference for the left . progressive. “The minimum tax on multinational companies will bring some improvement in collection and counteract some egregious abuses, but it is completely inadequate,” he commented during an interview at the IE University in Madrid, where he traveled to present the latest report on the subject of tax evasion. the EU Tax Observatory, of which he is the director.
Questions. There are millionaires who demand more taxes. Is society changing?
Answer. It shows that more and more people are realizing that the way we tax the rich and multinational corporations is unsustainable. They are the ones who have benefited most from globalization and from the economic growth of the last few decades. And yet they pay less and less taxes. On the other hand, I welcome this step, but I believe that it is not up to the rich to decide how much taxes they should pay. I believe it is up to all people to decide through democratic deliberation and voting.
Q And the governments? Almost all countries have abolished wealth taxes.
R. There are two ways to look at it. It can be said that most countries have abolished wealth taxes because they don't work. And it is true that in the past they have faced all sorts of problems: tax evasion, tax competition, avoidance… The other option is to understand what didn't work and how to fix it. For a long time we tolerated tax evasion. But now the situation is different, there is an automatic exchange of banking information. Tax evasion and tax competition are not natural laws. These are political decisions and others can be made.
Q The latest report from the EU Fiscal Observatory proposes a global wealth tax.
R. First we need to understand the problem. If you are very rich, it is very easy to avoid income tax. We saw it with ProPublica's revelations about the taxes paid by Jeff Bezos and Elon Musk. It's easy for the super-rich to structure their assets so that they don't generate much taxable income. This is where the income tax fails. It is probably one of the biggest problems with our tax systems and needs to be addressed. In fact, it is the most important recommendation we make in the report: a minimum tax on the rich. The question is, a minimum, expressed as a fraction of what? Since the concept of income is not very well defined for the very rich, it should not be expressed as income but rather as wealth.
Our proposal includes a minimum tax equal to 2% of billionaires' wealth each year. It is consistent with what multinational companies have done in the area of taxation. There is an international agreement on a global minimum tax of 15%, which will apply in the EU from January 1st this year. The next step is to do the same with very rich people.
Q And who should design it?
R. These taxes are best designed in a coordinated manner, but that does not mean that international agreements are always necessary. A country or group of countries can move forward unilaterally. Second, over the last two decades, the OECD has advanced work on international taxation and accomplished important things. However, there is one big caveat: it is not a global organization. It represents only 38 high-income countries. It is important to have truly inclusive negotiating frameworks that take into account the interests of everyone, including the billions of people in the global south. Therefore, in the future it would probably be better to have a combination of international organizations.
Q The United Nations is already working on a global financial framework. Does it threaten the progress of the OECD?
R. No, I think it complements your work and is a step in the right direction. It's not good to have a monopoly.
Q During the last vote, the divide between North and South became clear.
R. I think it was a mistake for OECD countries to vote no or abstain. They should realize that it is no longer possible to regulate globalization and taxes only from a very narrow, Western-centric perspective.
Q Should the G20 address wealth taxation?
R. In my opinion, this should and will be the case, as the political will exists in several countries. I will mention two. One of them is the USA. Three or four years ago, when he was campaigning in the Democratic primary, Biden was strongly opposed to taxing the rich. I think he will now make this the cornerstone of his re-election campaign. Then there is Brazil: The country holds the G20 presidency this year and knows that we have reached the end of a cycle in international taxation. A new one needs to be opened and they want it to focus on taxing the rich. These issues will be at the center of international political debate in the coming years.
Zucman during the interview this Monday in Madrid. Alvaro Garcia
Q So the challenge is to design it well.
R. The challenge is to learn from past mistakes. Governments tolerated tax evasion and competition. Existing wealth taxes were outdated in the sense that people had to declare their wealth themselves. What we are proposing is that billionaires be taxed first. Most of their wealth consists of stocks in listed companies, and if not, their value can be estimated by looking at how the market values similar companies listed on the stock exchange. The automatic exchange of banking information makes it difficult to hide assets in tax havens. Governments know a lot about the wealth of the rich. Finally, but perhaps most importantly, tax competition must be addressed. Some countries will try to attract the rich, who are free to move wherever they want. The others should collect the taxes that the tax havens do not want to collect, as collectors of last resort. This is an important idea that is already contained in the agreement on the tax on multinational companies. We need to apply this logic to the rich.
Q Isn't there a danger that all these taxes will hamper growth and slow wealth creation?
R. The fundamental driver of economic growth was and is access to quality education and health for all, as well as good public infrastructure. In addition, there is a significant need for revenue to combat climate change. These investments will only be sustainable if the taxes that finance them are collected fairly. Of course, the way they are collected has an impact on economic growth. It is also crucial to the dynamics of inequality. They are matters of the first order in terms of public policy. Without taxes, no collective action is possible. There is no society. Choosing and deciding how to collect these taxes is probably the most important democratic issue we all face as citizens and voters.
Q The EU has started applying the 15% minimum rate to multinational companies. What expectations do you have?
R. It is a step in the right direction and a milestone in the regulation of globalization. It will provide some improvement in multinational tax collection and eliminate some egregious abuses, but it is also woefully inadequate. The 15% rate is very low and in practice companies could pay less. For example, if they have a sufficient presence in a tax haven, the corresponding profits can be exempt from the minimum tax. It is a very perverse idea because it creates incentives to move real production to places with low taxes and will increase international tax competition. What we show in the report is that the current deal will only generate half the expected revenue compared to a deal without loopholes. It's the glass half full or half empty depending on how you look at it, but at least it's there. There is nothing stopping a country like Spain or a group of countries from saying: “For us, 15% is not enough and it will be 20% or 25%,” which makes it more ambitious.
Q And pillar 1 [gravar a parte de los beneficios de las mayores compañías del mundo] is dead?
R. Yes, because only a handful of companies, around 70 to 80, most of them in the USA and China, do not want to apply the agreement. There is no way forward, but it is not the end of the world. Improving the minimum rate will also address the problems in the digital industry.
Q Can international taxation be changed without the US? There are the largest companies in the world and also the richest on the planet.
Q So will it be possible to put an end to tax havens and tax avoidance and evasion in the future?
R. There is an opinion that there can be no globalization without tax havens, and this is a wrong view. There can always be countries that play the role of collector of last resort. If Spain decides that multinational companies should pay at least 25%, it can calculate the budget deficit of each multinational company that has access to its market, defined as the difference between what they would be taxed worldwide and what they would have to pay if they would have access are subject to a minimum tax of 25% in each country in which they operate. Some pay at least 25% everywhere and have no additional tax in Spain, but those who don't? Spain could increase a fraction of its budget deficit. For example, if Apple has a global budget deficit of 10 billion and makes 10% of its global sales here, Spain could say: “If you want to continue to have access to our market, you have to pay 10% of 10 billion, so 1 billion additional euros.” in taxes.” The logic is very simple: market access must be linked to minimum taxation.
Q And there is no risk of him leaving Spain?
R. No. The tax depends on what the company is taxed abroad and where your customers are based. Even Apple, with all its power, can relocate its profits and its offices, but fortunately it cannot relocate its customers.
Q What influence do ideologies or the fear of losing voters have on the government's financial policy decisions?
R. I do not want to downplay the role of ideology and the many powerful economic actors involved in maintaining the status quo. But I don't think that's the real crux of the problem. The main reason we have made so little progress is that most people are convinced that nothing can be done alone in a globalized world. This view is wrong. The bulk of the work of the EU Fiscal Observatory is to explain in very concrete and practical terms why this vision is wrong, what unilateral measures can be implemented and to show that globalization and European economic integration are compatible with justice on the one hand and progressive taxation on the other.
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