Decisions made at the Group of 20 (G20) meetings are important because the forum includes many of the world’s largest developing and developed economies, with G20 members accounting for approximately 85% of global GDP, 75% of international trade and two-thirds of global GDP. the world population.

This week, G20 leaders met after a long year of G20 meetings. Brazilian President Inacio Lula da Silva has handed over the baton to President Cyril Ramaphosa as South Africa takes over the leadership of the G20 in 2025.

One of the most important results of the Brazilian presidency of the G20 was the ministerial meeting statementapproved by the presidents and prime ministers of all G20 states, on tax cooperation. The statement states that “with full respect for fiscal sovereignty, we will seek to collaborate to ensure that wealthy individuals are effectively taxed. Cooperation could involve exchanging best practices within the G20, encouraging debates on tax principles and designing anti-avoidance mechanisms, including tackling potentially harmful tax practices.

This negotiated text is due to Brazil’s efforts to put international taxation on the G20 agenda, stimulated by a report responsible for presenting options for taxing the super-rich more effectively. The report, carried out by French economist Gabriel Zucman, reveals that billionaires pay less income tax than other income groups. Additionally, current mechanisms for taxing billionaires are hampered by lack of information about the wealthy, such as the location of their wealth, lack of global cooperation, and the regressive nature of international tax systems.

The report proposes a model for a coordinated minimum effective tax standard for high net worth individuals. The basic proposal calls for dollar billionaires (3,000 individuals worldwide) to pay at least 2% of their wealth in individual taxes each year. The Zucman report explains that “the individual taxes taken into account to calculate this minimum would be personal income tax, wealth tax and economically equivalent levies”. Globally, this proposal estimates annual revenues of between $200 billion and $250 billion.

Taxing the super-rich at 2% per year is a small price to pay in global efforts to achieve the United Nations Sustainable Development Goals (SDGs) and reduce global inequality. Only 19% of the SDGs are on track to be achieved and the financing gap is greater than 4 trillion dollars. As the world becomes increasingly divided, it becomes necessary to put in place mechanisms that strengthen solidarity and bind the international community together. The plan to tax the super-rich is a historic proposal that has brought together finance ministries and central bank governors from around the world. different parts world to discuss ways to improve the progressivity of the global tax system.

Some of the issues related to the proposal to implement a minimum standard for the very wealthy require further consideration, including:

• Although the proposal was initially tabled at the G20, effective cooperation between countries requires deliberations to be transferred to the UN to align with the protocols of the United Nations Framework Convention on International Tax Cooperation.
• The focus on dollar billionaires reduces the scope of revenue that could be generated by African billionaires to serve the continent. In Africa, there is only 20 billionaires and six of them come from South Africa. For comparison, there are more than 800 dollar billionaires in the United States and 320 in Europe. In this case, the basic proposal would only raise about $1.6 billion per year in Africa. This represents only 0.66% of estimated revenues. Unless there is a global agreement for the revenue collected to be pooled and redistributed globally from a given vertical fund, this will disproportionately benefit countries in the Global North.
• The tax target should be broadened to enhance progressivity, particularly for countries with few dollar billionaires. Zucman’s broader proposal to broaden the scope and increase revenue to include centimillionaires (over $100 million) at the same proposed 2% tax rate would generate additional revenue of between $108 billion and $135 billion .
• Local tax administrations should be strengthened while international instruments are put in place. Many African countries, such as Kenya, Rwanda, Sierra Leone, Uganda and Zimbabwe, have put in place provisions to tax high net worth individuals. However, implementing and enforcing these measures remains a challenge, in part due to the corruption of politicians by the super-rich. Other challenges include the lack of comprehensive data on wealth and income, limited capacity of tax administration, and widespread practices of tax evasion and evasion.

Progress on these challenges is possible. In 2015, Uganda created a dedicated unit within its administration to tax high net worth individuals, which increased tax compliance among high net worth individuals, as the number of high net worth Ugandans filing tax returns increased from 13% to 78% in one year. THE SA Revenue ServiceThe unit has also grown, managing more than 4,000 high net worth individuals with gross assets worth R75 million or more.

International and domestic tax systems must go hand in hand if we are to reduce inequality between and within countries. Strengthening national tax systems will allow African countries to benefit from proposals to improve international tax cooperation.

The proposal for a minimum standard for taxing the very rich has stimulated debate over taxing the rich. We have an instrument we can use to raise enough revenue to fight poverty, inequality and hunger, and finance climate change adaptation and mitigation.

• The authors are with the Institute for Economic Justice.