Ever wealthier millionaires in a world where the coronavirus deepens poverty: The contrast between those who are the most and the most disadvantaged is also fueling the call for wealth taxes in Latin America.
Often classified as “the world’s most unequal region”, it exhibits wide disparities in income distribution, which could exacerbate the pandemic.
The Latin American Economic and Social Justice Network (Latindadd) revealed in late 2020 that the richest 1% in the region owns 41% of the wealth. But that group only contributes 3.8% to the treasury collection.
According to the NGO Oxfam, “the world’s 1,000 largest fortunes had made up for the economic losses caused by the pandemic in just nine months.”
While giants like Amazon, Facebook or Tesla are breaking records on Wall Street, an Oxfam report published before the Davos Economic Forum in January warns that it could take a decade for the poorest to overcome.
In fact, billionaires worldwide saw their fortunes increase by $ 3.9 trillion between March 18 and December 31, 2020, Oxfam noted.
Like many proponents of direct redistribution mechanisms, Latindadd promotes the “tax on big fortunes” that Oxfam says would enable the fight against “the virus of inequality”.
In Latin America, this mechanism would raise more than $ 26,500 million, an amount Latindadd considers sufficient to distribute the covid-19 vaccine free of charge.
But while these types of taxes have been introduced in Argentina or Bolivia, their effectiveness is questioned in countries such as Brazil and Chile.
– The theory and practice –
Fearing a social explosion, the Davos economic and political elite expressed concern about growing inequality.
“Rather than crying with crocodile tears, the owners of the world should continue to do practical work,” said AFP economist Thomas Piketty, arguing for a universal tax, “on a portion of tax revenue (…) the most. prosperous economic players on the planet. “
Some extremely wealthy individuals who increased their fortunes during the pandemic have taken numerous personal donation initiatives.
Microsoft’s Bill and Melinda Gates are WHO’s top private donors. MacKenzie Scott, the ex-wife of Amazon founder Jeff Bezos, donated $ 6 billion to various charities in 2020. Kim Beom-su, founder of KakaoTalk, South Korea’s most popular messaging service, will donate more than half of his $ 9.4 billion fortune.
But Latin America is far from these figures for individual donations, and some countries are in favor of a more systematic and mandatory option.
– Argentina and Bolivia are leading
The center-left government of Alberto Fernández in Argentina wants to raise $ 3 billion this year with a tax that will reach about 12,000 people, to fund supplies for the pandemic, aid to SMEs or scholarships.
Even more punctual was the tax introduced by Bolivia’s President Luis Arce, which will reach just 152 people with assets of more than $ 4 million and collect only $ 14.3 million, a figure that makes it rather symbolic.
In Brazil, the proposals have not been brought forward in Congress, nor do they appear in current tax reform initiatives, despite the fact that it is a tax provided for in the 1988 Constitution that explicitly calls for “the imposition of taxes on (.. .) great fortunes. ”, regulated by a law never passed for fear of capital flight.
Last year, opposition parliamentarians in Chile increased a temporary tax on the “super rich” to tax the assets of those who have more than $ 22 million by 2.5%. But the idea, which aims to generate about $ 6.5 billion to support the fight against Covid-19, has not taken off.
– Is taxing capital a solution?
For IDB tax policy expert Alejandro Rasteletti, the discussion is “welcome” in an unequal region, where “tax policy has very low redistributive impact”.
“The tax on large fortunes makes the system more progressive,” that is, it tries to make those who have more pay more, but “it doesn’t end up redistributing that way because in practice it can’t collect that much” because ” it is relatively difficult to charge because you can avoid it in different ways, ”he explains to AFP.
In Europe, a rich continent, collection through this mechanism reaches only 0.2% of GDP, a “very low” volume, the specialist added.
“At the IDB, we’ve been pushing through the property or property taxes for a long time (…) which is very difficult to avoid (and) it’s absolutely progressive, because the biggest houses are owned by the richest,” he summarized.
mr / ll / yow / ltl