(Bloomberg) -- Global finance leaders are poised to set limits on Brazilian President Luiz Inacio Lula da Silva’s call for a global tax on billionaires, consigning the initiative to research on taxation and inequality that could take years to deliver results.
Group of 20 finance ministers gathering this week in Rio de Janeiro will likely issue a joint declaration on Thursday calling for studies on how governments can increase transparency and fairness when it comes to taxing individuals, according to officials from multiple countries attending the meetings.
That task will be carried out by the architects of a global minimum levy on corporations, a G-20 plan that’s made some progress in recent years. Still, the planned declaration was described by some as a polite way of putting Lula’s proposal on ice.
The idea has split the G-20 and the Group of Seven, with France’s vocal backing running into a swift rejection from other developed countries, led by the US. Treasury Secretary Janet Yellen has said the US supports progressive taxation but would not support a global arrangement on taxing the super-rich that then redistributed the proceeds across borders.
People familiar with the German finance ministry’s perspective say there isn’t much support in the G-20 for Brazil’s proposal, though topics such as increasing transparency or fighting tax evasion could be discussed in this context. Meanwhile, South Africa, which will take over the G-20 presidency from Brazil at the end of the year, has backed the initiative.
The Thursday statement is set to offer a compromise that effectively rejects a levy in the short term, but gives Lula something to tout for his efforts. Brazilian officials have acknowledged that their proposal is a longer-term objective that wasn’t expected to deliver immediate results, and may count any statement on the need to address the question as a success.
Speaking ahead of the meeting, French finance ministry officials said that working on transparency and information exchanges would be a first step forward that would lay down a marker on the issue.
Whether the proposed research will produce any concrete results is another matter.
Officials said the task will be handed to the Inclusive Framework — a group of around 140 countries hosted by Paris-based Organization for Economic Cooperation and Development that crafted global rules on taxing corporations.
Advocates of taxing the world’s super-rich point out that the path to a global minimum tax on corporations also began with work on transparency, cooperation and joint work on harmful tax practices. Still, it’s taken around a decade to get to a point where countries have begun acting to address the flaws they identified in corporate taxation.
Moreover, the Inclusive Framework has long struggled to figure out how revenues from taxes on multinationals should be shared. Implementation of that aspect of the plan has foundered amid a squabble over technical details and a lack of support from the US Congress.
One senior US Treasury official said they didn’t expect this week’s gathering would produce any resolution of the technical issues, which would also encompass rules on transfer pricing.
Lula’s plan was designed to close loopholes that allow the world’s super-wealthy to pay what many consider to be unfairly low tax rates.
It called for a 2% minimum tax on wealth that would hit about 3,000 of the world’s richest people. The plan’s main designer, French economist Gabriel Zucman, said it could raise as much as $250 billion per year. But he also acknowledged ahead of the G-20 that the efforts are designed to pay off in the long term.
--With assistance from Christopher Condon, Fran Wang, Martha Beck, Andrew Rosati and Jack Witzig.
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