Applying the so-called "Zucman tax" – a levy on grand fortunes devised in France – in seven Latin American countries would raise US$24 billion annually from just 3,000 people, a new study has revealed.
The report on a minimal levy on individuals with huge asset wealth in Latin America proposes a way to tax extreme wealth, but the idea also faces resistance in the second-most unequal region in the world.
"Inequality in Latin America will not correct itself on its own – we need a minimum tax on grand fortunes," said Vicente Silva, author of the study, which analyses the tax system in Argentina, Brazil, Chile, Colombia, Mexico, Peru and Uruguay.
The study proposes implementing a two percent tax on fortunes superior to US$100 million, which would rake in US$24 billion annually in those seven countries.
"This issue has no political colours," said Silva, senior advisor at the Observatorio Fiscal Internacional, pointing out that all the governments in the region face the need to satisfy social demands in a context of fiscal constraints and a rising cost of living.
An expert in inequality, the lawyer told the AFP news agency that during the research it was observed that the "one percent richest pay proportionally less taxes than the 50 percent poorest."
The Zucman tax would impact only around 3,000 persons out of a total universe of 500 million inhabitants across the seven countries analysed.
A more ambitious hypothesis proposes that if a three-percent tax is applied, the revenue haul would climb to US$36 billion, according to the study commissioned by the Brazilian government.
"Our proposal would also permit the correction of regressive taxation at the highest levels, assuring that the superrich contribute according to their economic capacity and pay at least as much as the rest of society," explained Silva.
The expert points out that "the super rich in countries like Brazil and Chile, effectively pay virtually half as much in taxation as the population on average in a context in which the billionaires have multiplied sixfold in the past 25 years."
Brazil defended imposing a tax on great fortunes in 2024 when presiding over the G20, commissioning a report by the French economist Gabriel Zucman, after whom the tax proposal is named.
The idea proposed to the G20 was to create a two percent tax on all fortunes exceeding US$1 billion, with a potential revenue haul of US$200 billion to US$250 billion annually.
Despite the resistance, at the G20 Leaders Summit in Rio de Janeiro last year, the group of the world’s 20 richest economies pledged to "co-operate to guarantee that individuals with super-high net assets are effectively taxed."
"In a region with so much inequality, effectively taxing the biggest fortunes means applying a mínimum wealth tax to ensure that the superrich pay at least the same as the rest of the population," Zucman, the director of Observatorio Fiscal Internacional, told AFP news agency.
"Today the big fortunes have annual returns on their wealth of eight percent. A minimum tax of two percent on those levels of returns will basically only scratch their portfolios, lowering those returns very slightly," he said.
For Silva, the technical capacity to implement that tax is there but the "political will" to confront "much polarisation" and the opposition of the elites is lacking.
"It’s not easy opposing installed narratives," he pointed out, citing as an example the concept that lower taxes on the richest increase growth, an idea rebutted by citing a London School of Economics study affirming that there is no evidence from the last 50 years that tax cuts on the highest incomes drive economic activity.
Silva vigorously rejects any massive fiscal exodus as a result.
"The evidence shows that people do not leave, they have their roots and contacts in the country, their business and a [good] economic position," he argued.
"If somebody decides to move their fiscal residence on tax grounds, our scheme contemplates anti-exit mechanisms to diminish the risk of that happening. In the final analysis, fiscal competence is a political decision and we have the tools to face up to it," explained Silva.
by Ariela Navarro, AFP
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