https://www.theguardian.com/business/2023/oct/22/eu-funded-report-calls-for-wealth-of-super-rich-to-be-taxed-not-income [p] Skip to main contentSkip to navigationSkip to navigation Print subscriptions Sign in Search jobs Search US edition[ ] * US edition * UK edition * Australia edition * International edition * Europe edition The Guardian - Back to homeThe Guardian [ ] * News * Opinion * Sport * Culture * Lifestyle ShowMoreShow More * [ ]News + View all News + US news + World news + Environment + US politics + Soccer + Business + Tech + Science + Newsletters + Fight for democracy * [ ]Opinion + View all Opinion + The Guardian view + Columnists + Letters + Opinion videos + Cartoons * [ ]Sport + View all Sport + Soccer + NFL + Tennis + MLB + MLS + NBA + NHL + F1 + Golf * [ ]Culture + View all Culture + Film + Books + Music + Art & design + TV & radio + Stage + Classical + Games * [ ]Lifestyle + View all Lifestyle + Fashion + Food + Recipes + Love & sex + Home & garden + Health & fitness + Family + Travel + Money * Search input [ ] google-search Search + Support us + Print subscriptions * [ ]US edition + UK edition + Australia edition + International edition + Europe edition * + Search jobs + Digital Archive + Guardian Puzzles app + Guardian Licensing + The Guardian app + Video + Podcasts + Pictures + Inside the Guardian + Guardian Weekly + Crosswords + Wordiply + Corrections * + Facebook + Twitter * + Search jobs + Digital Archive + Guardian Puzzles app + Guardian Licensing * Business * Economics * Diversity & equality in business * Small business * Retail Luxury yachts moored in the harbour at Monte Carlo. [ ] Luxury yachts moored in the harbour at Monte Carlo. Photograph: Graeme Robertson/The Guardian Luxury yachts moored in the harbour at Monte Carlo. Photograph: Graeme Robertson/The Guardian Tax avoidance EU-funded report calls for wealth of super-rich to be taxed, not income Wealthiest 3,000 working on 'edge of legality' using shell companies to funnel dividends and own property to avoid income tax, says study Kalyeena Makortoff @kalyeena Sun 22 Oct 2023 18.00 EDTLast modified on Mon 23 Oct 2023 02.28 EDT * * * Billionaires have been operating on the "border of legality" in using shell companies to avoid tax and the world's 3,000 wealthiest individuals should be charged a 2% levy on their wealth, a research group created to inform EU tax policy has claimed. King Charles urged to push for breakup of UK's 'network of satellite tax havens' Read more In its inaugural global tax evasion report, the Paris-based EU Tax Observatory said billionaires have been pushing the limits of the law by moving certain types of income, including dividends from company shares, through dedicated holding companies that usually serve no other purpose. "These holding companies are in a grey zone between avoidance and evasion," the report said. "To the extent that they are created with the purpose of avoiding the income tax, they can legitimately be seen as closer to evasion." The EU Tax Observatory, led by the economist Gabriel Zucman, was founded three years ago and is funded by the EU as part of its efforts to combat tax abuse. These types of loopholes allow the super-rich to avoid certain forms of income tax, resulting in effective tax rates worth just 0%-0.6% of their total wealth, the report found. Meanwhile, income taxes levied on most wealthy citizens who do not employ these loopholes, end up paying between 20% and 50%. Shell companies can also stand in as nominal owners for luxury properties in expensive cities such as London. "Real estate continues to provide ample opportunities for the rich to avoid and evade taxes," the report said. The shell companies also fall outside the most effective tools that have so far been used to combat tax avoidance, including the automatic exchange of banking information, which is followed by more than 100 countries. "To date no serious attempt has been made to address this situation, which risks undermining the social acceptability of existing tax systems," the report said. The Observatory, which deployed more than 100 researchers to gather the report's data, is now calling on global leaders to use the next G20 summit in Brazil in November 2024 to launch talks over a global minimum 2% annual tax to be levied on the wealth - rather than the income - of the world's richest people. It says the measure could raise PS250bn (PS205bn) a year from the world's 2,756 known billionaires, who together are believed to be worth $13tn. The idea is based on the 2021 agreement between 140 countries and territories to impose a global minimum tax rate of 15% on the biggest multinational companies. Zucman said: "This is the logical next step after the global minimum tax on multinational companies - which demonstrates that it is possible for countries to agree on minimum tax rates." He said minimum rates were the most powerful tools to address loopholes in existing tax systems because they ensure that no matter what the avoidance measures used, the tax collected cannot fall below a set amount. Commenting on the report, Nobel prize-winning economist Joseph Stiglitz said: "Tax evasion, and, more broadly, tax avoidance, is not inevitable; it is the result of policy choices - or the failure to make policy choices that act to stop it." He explained that a billionaire's tax would help governments fund important services such as education, infrastructure and technology, and soften the blow of oncoming crises, including future pandemics, and those linked to extreme weather events as a result of the climate crisis. "So many people struggle to make ends meet yet pay the taxes their governments ask of them," Stiglitz said. "We need to make sure those at the top of the income ladder who certainly have the financial means don't wriggle out of them." The Observatory also warned about other looming risks for tax revenues, including in the area of green energy subsidies. The report explained that a race for green energy producers was resulting in much larger tax exemptions that could more than offset the gains made by the newly enforced 15% minimum corporate tax rate. While it has the potential to accelerate a country's transition to zero-carbon emissions, the Observatory said it raises some of the same issues as standard tax competition. "It depletes government revenues, and if not accompanied by egalitarian measures, it risks increasing inequality by boosting the after-tax profits of shareholders, who tend to be towards the top of the income distribution." 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