Global minimum taxation for the super-rich: A new approach with far-reaching implications?

Taxation of the ultra-wealthy is a topic that is gaining increasing relevance – both in public discourse and on the international stage. A recent proposal presented at the G20 summit provides a blueprint for a globally coordinated minimum tax for ultra-high-net-worth individuals (UHNWI). The goal is to achieve a fairer distribution of the tax burden while strengthening the funding base for public goods.

 

What is being proposed?

At the core of the proposal is a minimum tax of 2% on the wealth of individuals with a net worth exceeding USD 1 billion. This tax should be internationally coordinated, with flexible implementation options – whether through wealth tax, extended income tax or a tax on deemed income. According to the study underpinning the concept, this measure could generate between USD 200 billion and USD 250 billion annually, which could be used to finance infrastructure, education and climate protection.

Why now?

The proposal stems from the recognition that the super-rich pay significantly lower effective tax rates compared to the rest of the population. This is primarily due to tax planning strategies such as:

  • Avoiding dividend and capital gains distributions: Many super-rich individuals derive their income not from salaries but from corporate profits, which are taxed at lower rates.
  • Using holding structures: Profits are retained within companies, thus escaping personal taxation.
  • According to the report, this situation results in billionaires effectively paying as little as 0.3% of their wealth in taxes – a fraction of what the average citizen contributes.

Challenges and opportunities

Implementing such a minimum tax comes with several challenges:

  • Valuation of wealth: Determining the value of non-publicly traded assets is particularly complex.
  • International coordination: Not all countries may be willing to adopt such measures, potentially encouraging tax evasion.

Nevertheless, recent history shows that international cooperation is possible. Global minimum taxation of multinational enterprises, introduced in 2021, serves as a positive example. Similar mechanisms could be developed to minimise tax avoidance and maximise effectiveness in taxing the super-rich.

A paradigm shift in international tax policy

Although global minimum tax for the super-rich is still under discussion at the international level, national legislators could adopt similar measures or adjust existing tax regulations. For affected individuals, this makes tax planning and compliance even more critical. The idea of a global minimum tax for the super-rich could herald a paradigm shift in international tax policy. Developments in this area remain intriguing and could have far-reaching consequences.

Our tax experts are closely monitoring these trends. We assist our clients in understanding the potential impact of new regulations and making timely adjustments. Our expertise helps them minimise tax risks and identify individual solutions.