G20 Agrees to Tackle Taxation of the Super-rich, But Forum Not Yet Decided

TEMPO.CO, Rio De Janeiro - The first-ever joint declaration by G20 finance leaders vowing to cooperate on effectively taxing the world's largest fortunes on Friday, July 26, papered over deeper disagreement about the right forum to advance the agenda.

Finance ministers and central bankers from the Group of 20 major economies agreed to reference fair taxation of "ultra-high-net-worth individuals" in both their joint communique and a separate declaration on international tax cooperation on Friday.

"We will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed," said the final draft of the G20 ministerial declaration in Rio de Janeiro, seen by Reuters.

However, fault lines have already emerged about whether to do that in talks at the United Nations or via the Organization for Economic Cooperation and Development (OECD), a group of wealthier democracies founded by U.S. and European allies.

U.S. Treasury Secretary Janet Yellen told Reuters on the sidelines of the G20 meeting that she believes the OECD, which shepherded negotiations for a global two-part corporate tax deal for the past three years, is better placed to handle such talks.

"We don't want to see this shifted to the UN," Yellen said, adding that the OECD "is a consensus-based organization. We've made a huge amount of progress, and the UN doesn't have the technical expertise to do this."

Wall Street's major indexes ended higher on Friday,

Major developing nations have already bristled at that approach, according to an official familiar with the matter, who said Brazil should use its G20 presidency to advance discussion at both the UN and OECD.

Some of the most vocal advocates of a global minimum tax on billionaires, including Nobel laureate Joseph Stiglitz, insisted that the UN was the proper forum for global tax cooperation.

"We call on G20 leaders to align with the progress being made at the UN and establish a truly democratic process for setting global standards on taxing the ultra-rich," said Oxfam International's Tax Policy Lead Susana Ruiz.

"Entrusting this task to the OECD — the club of mostly rich countries — would simply not be good enough," she added.

Brazilian Finance Ministry official Guilherme Mello said that the UN Framework Convention on International Tax Cooperation represented a victory for the developing nations of the "Global South" who seek a venue where they are better represented, as most countries are not members of the OECD.

Still, Mello recognized both the OECD and the UN as legitimate forums, and he said an ongoing discussion of how to effectively tax the super-rich is progress, whatever the forum.

"The shape this will take depends on many dialogues that will be held," he added.

Some observers remained skeptical about the chances of a global "billionaire tax" targeting the world's largest fortunes.

European officials pointed out that not even the 27-nation European Union has power of taxation as a bloc. Although France lent early support to a global minimum wealth tax, Germans have offered stiff resistance.

"It seems that it might be very difficult to bring this forward," said one European official at the G20 meetings.

REUTERS

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