Brazilian President Luiz Inacio Lula da Silva, who hosts the G20 summit in Rio de Janeiro starting Monday, will seek to advance tax plans for the world’s richest billionaires, who often exploit complex loopholes to avoid taxes.

At the G20 finance ministers meeting in Rio in July, the world’s richest countries agreed to launch a “dialogue on fair and progressive taxation, including for ultra-high net worth individuals” despite fierce resistance from the United States and Germany. The coalition government collapsed.

While the world’s growing geopolitical problems – the Ukraine and Gaza conflicts, the possibility of a second Trump term on US and China trade – are expected to dominate the two-day summit, Lula hopes to push forward his wealth tax plan as the money raised demands from billionaires will help raise other pressing global issues.

Advocates say new tax will cause little pain

The plan, designed by French economist Gabriel Zucman, would impose a 2% annual tax on the ultra-rich not only on their annual income but also on their total net worth. This includes real estate assets, company shares and other investments. Zucman estimates that the top 0.01% of the population pays only 0.3% of their wealth in effective taxes.

According to Forbes’ List of the World’s Richest Billionaires, the new tax could raise up to $250 billion (237 billion euros) a year from approximately 2,800 billionaires around the world, whose total net worth is estimated to be $13.5 trillion. The funds raised will be used to combat growing global inequalities, particularly among heavily debt-burdened low-income countries, including many in Africa.

“Taxing high-net-worth individuals is very important because it can be a source of financing initiatives that combat hunger and poverty, and also combat climate change,” said Tomas Marques, a research fellow at the GIGA Institute for Latin American Studies in Hamburg. DW.

Developing countries, which many scientists say are disproportionately affected by climate change, have been demanding funds to offset the worst effects of climate change for years. Success stories include World Bank and Green Climate Fund support for India’s bid to increase solar power capacity, and support for Brazil’s Amazon Fund, which aims to reduce deforestation, partly financed by Norway and Germany.

Doubts over G20 spending plans

While there is broad public support for new taxes on the ultra-rich, the rise of national populism in many G20 countries is increasing scrutiny of how public money is spent, amid concerns that international aid and development funds could be better used domestically.

“Most G20 countries are having difficulty balancing their budgets,” Maria Antonieta Del Tedesco Lins, an economist and associate professor at the University of Sao Paulo, told DW. “While extra taxes may help, it is very difficult to balance national pressures with new international or multilateral obligations.”

The opening ceremony in Rio on Monday will launch the Global Alliance Against Hunger and Poverty, an initiative under Brazil’s G20 presidency that aims to accelerate efforts to fight poverty and food shortages by 2030.

Brazil’s government is also a major backer of a proposed tax on the ultra-rich, alongside France, Spain and South Africa. Despite this support, the House of Representatives, the lower house of Brazil’s parliament, last month rejected plans for additional domestic taxes on high-net-worth individuals.

“It’s a shame that Brazil benefits so much (from this tax) because we are a very unequal country. If there was an international consensus (on taxing the super-rich), it would help negotiations in Brazil’s Congress,” Lins said. Join the G20 academic engagement group ahead of the summit.

In Brazil, as in the rest of the world, the rich often shield their wealth from tax authorities by setting up shell companies in countries with low or no taxes, taking advantage of banking secrecy laws, and creating foundations and charities that offer generous tax breaks. .

US rejects wealth tax proposal

Although China and India’s positions on the new tax are unclear, Washington is firmly opposed. US Treasury Secretary Janet Yellen said: Wall Street Magazine He said in May that the measure was “something we can’t sign.”

President-elect Donald Trump has yet to comment on the proposal, but he is unlikely to support raising taxes on the ultra-wealthy. His first term was marked by massive tax cuts that benefited wealthy individuals and corporations the most. But during his brief run for the White House in 2000, he promised to cut the national debt by imposing a one-time 14.25% tax on the wealthy.

Lula will then face formidable challenges in making meaningful progress during the two-day summit, especially given that many critical geopolitical issues as well as Brazil’s proposal to improve global governance will dominate the talks.

“Lula is a great negotiator,” Marques said. “He presents himself as someone who bridges the Global South and the Global North. But I don’t know how he can achieve consensus around this very sensitive issue.”

Wealth tax a boon for Africa

Better representation of Africa at the G20 is now critical; as the continent seeks to benefit from new tax schemes through poverty and climate alleviation funds. The African Union, a regional bloc of 55 African countries, will attend the Rio summit for the first time after being accepted as a full member of the G20 in August.

Next year South Africa will take over the G20 presidency; This will be the bloc’s fourth consecutive leadership from the Global South, following Indonesia, India and Brazil. This role will give the country, and Africa as a whole, greater opportunities to shape global policies and defend the continent’s interests.

Marques, who was in Rio for the summit, told DW: “African countries are under-represented at the G20, despite the continent’s global importance.” “But things are changing and the African Union is now starting to have some influence on policymaking.”

Edited by: Uwe Hessler