Zucman report: The rich pay more taxes - but there are important exceptions

  • From Sonja Hennen
  • Reading duration 3 min

Over the past 10 years, governments around the world have launched extensive initiatives to curb international tax evasion. A new study by the EU Tax Observatory shows how successful these efforts have been.

The fight against tax evasion has been at the top of the international political agenda for the past decade. A global minimum tax for companies, the end of banking secrecy - what have these measures achieved? Until recently, no one really knew. Now a team from the EU Tax Observatory think-tank, led by leading inequality researcher Gabriel Zucman, has taken stock for the first time.

What are the findings?

The good news first: The Global Tax Evasion Report 2024 comes to the remarkable conclusion that since the introduction of the automatic exchange of banking information between countries in 2016, offshore tax evasion by individuals has fallen sharply. A decade ago, full banking secrecy made it easy to hide assets in tax havens - more than 9% of global GDP in 2015. Today, it is only 3-4 per cent.

Zucman concludes that tax evasion is not a law of nature. Determined governments and multilateral agreements can make a difference. But the report also makes clear that the decline in one form of tax evasion does not mean that the problem as a whole has diminished - or that the rich are paying more tax overall.

This is not least because the global minimum tax that was introduced in 2021 has proven to be largely ineffective. 140 countries had agreed on a minimum tax of 15% for multinational companies. Since then, however, the tax has been watered down by various loopholes to an extent where its revenues have fallen short of expectations by a factor of two.

The picture is even bleaker when one looks at the tax deficit of billionaires. Zucman and his team conclude that billionaires today pay on average only 0 to 0.5 percent of their wealth in taxes per year. A fraction of the rate paid by ordinary citizens. Since the 1990s, their wealth has grown by an average of 7 percent per year. Zucman therefore demands that a minimum tax be introduced for billionaires as well. With a billionaire tax of only 2 percent per year revenues would amount to 200 billion dollars.

Parallel to the Tax Evasion Report, the "Atlas of Tax Havens" was published, documenting tax evasion in every country for the first time (atlas-offshore-world.org). The sobering result: Germany loses more revenue from profit taxes (26.2 percent) than any other country in the world.