A study suggests that implementing a global tax on billionaires could generate $250 billion.

The EU Tax Observatory proposed on Monday that governments take action against tax evasion by implementing a global minimum tax on billionaires, potentially generating $250 billion per year.

According to a research group at the Paris School of Economics, if implemented, the amount would only make up 2% of the total wealth of 2,700 billionaires worldwide, which is nearly $13 trillion.

According to their 2024 Global Tax Evasion Report, the group stated that billionaires are able to avoid paying a fair amount of personal taxes by using shell companies to shield their wealth from income tax, while other taxpayers with less wealth are not afforded the same opportunity.

According to Gabriel Zucman, the director of the observatory, we believe that this is hard to justify as it could potentially harm the longevity of tax systems and the public’s support for taxation.

The Observatory has estimated that personal taxes for billionaires in the United States are around 0.5%, while in high-tax France, they may be as low as zero.

The increasing disparity in wealth among certain countries is prompting demands for the wealthiest individuals to shoulder a greater portion of the tax burden. This is due to the strain on public finances caused by aging populations, the significant funding required for transitioning to a more climate-friendly economy, and the remaining debt from the COVID pandemic.

U.S. President Joe Biden’s 2024 budget included plans for a 25% minimum tax on the wealthiest 0.01%, but that proposal has since fallen by the wayside with lawmakers in Washington preoccupied with government shutdown threats and looming funding deadlines.

The Observatory noted that while it may take a significant amount of time for a united global effort to tax billionaires, the success of governments in eliminating bank secrecy and limiting multinational companies’ ability to evade taxes in low-tax nations serves as a model.

The observatory estimated that the implementation of automatic sharing of account information in 2018 has decreased the wealth stored in offshore tax havens by three times.

In 2021, a deal was made among 140 nations to restrict the ability of multinational companies to lower their taxes by reporting their earnings in countries with lower tax rates. This will be achieved by implementing a minimum global corporate tax rate of 15% starting next year.

According to Zucman, what was once considered impossible by many can now be achieved. The next logical progression is to use this approach for billionaires, not just multinational corporations.

According to Zucman, without a widespread global effort to implement a minimum tax for billionaires, a group of countries willing to do so could take the lead on their own.

The report stated that while the competition between countries on tax rates has ended due to the abolishment of banking secrecy and corporate minimum tax laws, there are still many ways to minimize tax expenses.

One illustration of this trend is the wealthy choosing to invest more in real estate rather than offshore accounts, while corporations are able to take advantage of loopholes in the minimum 15% corporate tax rate.

The Observatory reported that governments are now vying for investments by offering subsidies, which are less damaging to their tax revenues compared to solely competing based on low tax rates.