A former factory worker and now Brazil’s leftist president, LuizInacio Lula da Silva, who is heading the G20 this year, had proposed to levy a 2 per cent wealth tax on fortunes over $ 1 billion to raise an estimated revenue of up to $250 billion annually from some 3,000 individuals to eliminated extreme poverty and inequality.

Though Brazil’s search for a global agreement on taxing the richest of the rich was being backed by France, Spain, South Africa, Colombia and the African Union could not reach to fruition for now, there is still some hope, since the countries would discuss the matter further and work together as the agreed text for declaration suggests, which seeks a balance between national sovereignty and more cooperation on tax avoidance.

The G20 tax declaration text agreed on read, “With full respect to tax sovereignty, we will seek to engage cooperatively to ensure that Ultra-Rich-Net-Worth Individuals are effectively taxed.” It also reportedly included, “Cooperation could involve exchanging best practices, encouraging debates around tax principles, and devising anti-avoidance mechanisms, including addressing potentially harmful tax practices.”

European Economic Commissioner Paolo Gentiloni has said on the sidelines of the G20 meet, “We all know that we are starting a process which is very, very challenging. … The first step will be to work on exchange of information among different countries. It will be something to discuss in the coming months and years.”

Though US has rejected the idea of a global deal for now, the US Treasury Secretary Janet Yellen has said that they are happy to work with Brazil on that and propagate these ideas in the G20.” However, she said, "But tax policy is very difficult to coordinate globally and we don't see a need or really think it is desirable to try to negotiate a global agreement on that. We think that all countries should make sure that their taxation systems are fair and progressive."

Nevertheless, Brazil’s Economy Minister Fernando Haddad has expressed his confidence in the initiative, and said a “final declaration” to be published in this regard would mark the “first step.”

There was a broader agreement on the draft text that “Wealth and income inequalities are undermining economic growth and social cohesion and aggravating social vulnerabilities” and that international cooperation could help promote “fair, and progressive tax policies”.

Ahead of the third meeting of G20 Finance Ministers and Central Bank Governors, a new report by Oxfam has said that the richest 1 percent have amassed $42 trillion in new wealth over the past decade, nearly 34 times more than the entire bottom 50 percent of the world’s population.

It said that the average wealth per person in the top 1 percent rose by nearly $400,000 in real terms over the last decade compared to just $335 – an equivalent increase of less than nine cents a day – for a person in the bottom half.

“Inequality has reached obscene levels, and until now governments have failed to protect people and planet from its catastrophic effects,” said Oxfam International’s Head of Inequality Policy, Max Lawson. “The richest one percent of humanity continues to fill their pockets while the rest are left to scrap for crumbs.”

“Momentum to increase taxes on the super-rich is undeniable, and this week is the first real litmus test for G20 governments. Do they have the political will to strike a global standard that puts the needs of the many before the greed of an elite few?” Lawson said.

Oxfam has calculated that less than eight cents in every dollar raised in tax revenue in G20 countries now comes from taxes on wealth. Oxfam’s research also found that the share of income of the top 1 percent of earners in G20 countries has risen by 45 percent over four decades while top tax rates on their incomes were cut by roughly a third.

Globally, billionaires have been paying a tax rate equivalent to less than 0.5 percent of their wealth. Their fortunes have risen by an annual average of 7.1 percent over the last four decades, and an annual net wealth tax of at least 8 percent would be needed to reduce billionaires’ extreme wealth. G20 countries are home to nearly four out of five of the world’s billionaires.

OECD report to G20 on Taxation and Inequality says that persistent income inequality and the rising concentration of wealth at the highest end of the distribution have strengthened calls for tax policy action to mitigate inequality and support more inclusive growth. Some countries, in particular middle-income countries, have seen declines in income and wealth concentration at the top, but overall inequality has persisted and the share of wealth held by the top 0.001% globally has risen markedly. These trends are drawing more focus on policies to address these disparities and heightening the interest in tax policies as essential tools – alongside others – to address inequality and support inclusive growth.

OECD report further says that in low- and middle-income countries, pre-tax inequality tends to be high and tax and benefit systems often do little to mitigate it. This is primarily due to limited revenue mobilisation, which strongly constrains their capacity to deliver redistributive policies. Improving equity calls for increasing overall tax revenues, including by boosting economic growth, bolstering the formal economy, and strengthening enforcement to prevent tax avoidance and evasion. International tax collaboration can empower countries to more effectively implement their domestic tax policies, it says. (IPA Service)