G20 summit: Brazil’s billionaire tax plan faces pushback

Brazilian President Luiz Inacio Lula da Silva, hosting the G20 summit in Rio de Janeiro from Monday, will try to progress plans to tax the world’s richest billionaires, who often use complex loopholes to avoid tax.
At a July meeting of G20 finance ministers in Rio, the world’s wealthiest nations agreed to start a “dialogue on fair and progressive taxation, including of ultra-high-net-worth individuals,” despite fierce resistance from the United States and within Germany’s now collapsed coalition government.
While the world’s growing geopolitical issues — the Ukraine and Gaza conflicts, a second Trump term in the United States, and China trade — are expected to dominate the two-day summit, Lula hopes to move the wealth-tax plan forward as the money raised from billionaires will help boost funds for other pressing global issues.
Devised by French economist Gabriel Zucman, the plan would introduce an annual tax of 2% on the total net worth of extremely wealthy individuals — not just their annual income. This would include real estate assets, corporate shareholdings and other investments. Zucman has estimated that the top 0.01% of the population pay an effective tax rate of just 0.3% of their wealth.
The new levy could raise up to $250 billion (€237 billion) a year from the nearly 2,800 billionaires globally, who have a combined net worth estimated at some $13.5 trillion, according to the Forbes Richest World’s Billionaires List. The funds raised would be used to tackle growing global inequalities, especially among heavily indebted low-income countries, including many in Africa.
“The taxation of high net-worth individuals is very important as it could be a source for funding initiatives that fight hunger and poverty, and also tackle climate change,” Tomas Marques, a research fellow at Hamburg’s GIGA Institute for Latin American Studies, told DW.
Developing nations, which many scientists say are being disproportionately affected by climate change, have for years demanded funding to offset its worst impacts. Success stories include World Bank and Green Climate Fund support for India’s bid to boost solar power capacity and Brazil’s Amazon Fund, aimed at reducing deforestation, which is partly funded by Norway and Germany.
While there may be broad public support for new taxes on the super-rich, the rise of national populism in many G20 countries is increasing scrutiny about how public money is spent, amid concerns that international aid and development funds could be better deployed at home.
“Most of the G20 countries are having a hard time balancing their budgets,” Maria Antonieta Del Tedesco Lins, an economist and associate professor at the University of Sao Paulo in Brazil, told DW. “While extra taxes would help, it’s very hard to juggle national pressures with new international or multilateral obligations.”
Monday’s opening ceremony in Rio will launch the Global Alliance Against Hunger and Poverty, an initiative under Brazil’s G20 presidency that seeks to accelerate efforts in the fight against poverty and a lack of food by 2030.
The Brazilian government is also the principal backer of the proposed tax on the super-rich, along with France, Spain and South Africa. Despite this support, the lower house of Brazil’s parliament, the Chamber of Deputies, last month rejected plans for an additional domestic levy on those with large fortunes.
“It’s a shame because Brazil could benefit a lot [from this tax] because we are a very unequal country. If there was an international consensus [on taxing the super-rich] it could help negotiations in the Brazilian Congress,” said Lins, who took part in a G20 academic engagement group ahead of the summit.
In Brazil, as in the rest of the world, the super-rich often shield their wealth from tax authorities by creating shell companies in countries with low or zero taxes, taking advantage of banking secrecy laws and forming trusts and charitable foundations, which offer generous tax breaks.
While China’s and India’s positions on the new tax are ambiguous, Washington remains firmly opposed. US Treasury Secretary Janet Yellen told The Wall Street Journal in May that the measure was “something we can’t sign on to.”
President-elect Donald Trump has yet to comment on the proposal but is unlikely to back hiking taxes on the super-rich. His first term was marked by large tax cuts, which benefited wealthy individuals and corporations the most. But during his short-lived run for the White House in 2000, he did promise to cut the national debt by levying a one-time 14.25% tax on the wealthy.
Lula then faces tough odds in making any meaningful progress during the two-day summit, especially as many critical geopolitical issues, as well as Brazil’s proposal to improve global governance, will also dominate the talks.
“Lula is a great negotiator,” Marques said. “He bills himself as a bridge builder between the Global South and Global North. But I don’t know how he can reach a consensus around this very sensitive topic.”
Better representation at G20 for Africa is now critical, as the continent seeks to benefit from any new tax plan, through the receipt of poverty and climate alleviation funds. The African Union, the regional bloc of 55 African member states, will be attending the Rio summit for the first time, after being admitted as a full G20 member in August. 
Next year, South Africa will take over the rotating G20 presidency — the fourth consecutive leadership of the bloc from the Global South, after Indonesia, India and Brazil. The role will give the country and Africa as a whole further opportunities to shape global policies and advocate for the continent’s interests.
“African countries have been underrepresented in the G20 despite the continent’s importance globally,” Marques, who is in Rio for the summit, told DW. “But things are changing, and the African Union is now starting to have some influence on policy-making.”
Edited by: Uwe Hessler