Global Wealth Tax on Multimillionaires

ECONOMY/ INTERNATIONAL

• GS-2: Economy & Challenges
• GS-2: Bilateral, regional and global agreements affecting India’s interests

Global Wealth Tax on Multimillionaires

Context: Global billionaire wealth in 2021 represents 3.5 per cent of global household wealth.

• Also, the share of the top 0.01 per cent rose from 7 per cent of global wealth in 1995 to 11 per cent in 2021 as per the findings of the latest World Inequality Report 2022 showed.

The concentration of wealth

• Since the mid-1990s, the richest 1 per cent captured 38 per cent of wealth growth at the global level, the report says.
• As per the report, the richest 10 per cent own around 60-80 per cent of wealth, and the poorest half systematically own less than 5 per cent of wealth.
• The bottom 50% of the global population owns just 2% of wealth and 8 per cent of income, while the top 10 per cent of population owns 76 per cent of total household wealth and captured 52 per cent of total income in 2021, as per the report.
• It said that government intervention is key to tackling inequality with social and tax policies.

The solutions

• Economist Thomas Piketty has suggested developing new forms of wealth taxation on multimillionaires including a progressive rate of wealth tax with tax rates according to the value of the total amount of wealth owned.
• What has been happening is a higher concentration of wealth, more wealth inequality and our tax systems so far in most countries in the world have not adapted to this. 
• Such new taxes also makes sense especially when the governments are looking for money to repay the increased debt during Covid times.

Why the need for Global Wealth Tax?

• There is a proposal of global wealth tax on multimillionaires, people who own more than a million dollars or euros and this tax in this proposal is progressive, meaning that the rates are going to be according to the value of the total amount of wealth that one owns.
• In countries, where wealth is highly concentrated, more rates on the stock of wealth of very wealthy individuals can deliver high amounts of revenues.
• The global bottom 50 per cent income share remains historically low despite growth in the emerging world in the past decades.
• The share of global income going to top 10 per cent highest incomes at the world level has fluctuated around 50-60 per cent between 1820 and 2020 (50 per cent in 1820, 60 per cent in 1910, 56 per cent in 1980, 61 per cent in 2000, 55 per cent in 2020).
• However, the share going to the bottom 50 per cent lowest incomes has generally been around or below 10 per cent (14 per cent in 1820, 7 per cent in 1910, 5 per cent in 1980, 6 per cent in 2000, 7 per cent in 2020).
• The top 0.1 per cent of the global population captures more income than the entire bottom 50 per cent. 
• The average annual wealth growth rates among the poorest half of the population were between 3 per cent and 4 per cent per year between 1995 and 2021.
• The poorest half of the world population only captured 2.3 per cent of overall wealth growth since 1995. 
• The top 1 per cent benefited from high growth rates (3 per cent to 9 per cent per year). This group captured 38 per cent of total wealth growth between 1995 and 2021.
• The share of wealth detained by the world’s billionaires rose from 1 per cent of total household wealth in 1995 to nearly 3.5 per cent today, it said.

Income inequality in gender terms

• In gender terms, the income inequality is sharp, with women workers getting just one-third of total labour income.

• Women today get just one-third of all labour income in the world whereas gender parity would mean they get half of that. 
• But currently women earn just one-third of all incomes from work and the situation has increased since the 1990s but at a very slow rate. If we continue at this rate, we need to wait at least a century to reach gender parity.