We are closer to seeing the world’s first trillionaire than ending poverty: that’s why we need fair taxes now

Chiara Putaturo In the news, Inequality, Tax

Oxfam’s Davos report highlighted how our economic system funnels billions to billionaires while ordinary workers lose. A big part of the solution has to be new wealth and windfall taxes, including a European wealth tax, says Chiara Putaturo.

In the UK, millionaires proposing a solution to inequality projected the words ‘TAX WEALTH NOT WORK’ on to the Bank of England. (picture: Patriotic Millionaires UK)

We are much closer to seeing the world’s first trillionaire than ending poverty. Why? Because our economic system works for the few richest people, often men, who reign over our economy.  

Research published by Oxfam for the recent Davos summit reveals that the five richest men in the world have almost doubled their fortunes since 2020. It also uncovers that a billionaire is the chief executive or principal shareholder of seven of the world’s ten biggest corporations. This is no coincidence: wealth concentration and corporate monopoly are two sides of the same coin.

Monopoly men

From technology to pharmaceuticals, we are witnessing how modern monopoly men accumulate massive fortunes and influence. In the European Union, the top five richest men have increased their wealth at a rate of €6 million per hour since 2020. This adds up to an accumulated wealth of more than €400 billion –equivalent to half the education budget for all EU countries.

But behind billionaires are often big corporations, raking in windfall profits. Last year was the most profitable for huge companies: 22 of the world’s biggest headquartered in the EU made €172 billion in net profits in the 12 months to June 2023. This was 66 per cent more than their average profits for 2018-21.

These profits are funnelled to their ultra-rich owners, who can then buy influence in various ways. Billionaires and their corporations can pay for armies of lobbyists to influence policy-makers to make laws in their favour. They can decide which projects or sectors secure investments or loans and which do not, as the richest 1 per cent own over 40 per cent of global financial assets – including bonds and stocks. Finally, they can exercise influence over public opinion by controlling important media outlets. 

An example is the French billionaire Bernard Arnault. The second richest man in the world, Arnault presides over the luxury-goods empire LVMH, an umbrella for famous French brands such as Christian Dior, Louis Vuitton and Chandon. But his empire does not end with expensive perfumes and champagne: he also owns France’s biggest media outlet, Les Échos, as well as Le Parisien. Arnault is just one of many in a system that gives monopolists too much control over the economy and fuels inequality.

Inequality generators

Corporations have become inequality-generating machines. They are making record profits by squeezing workers, dodging taxes, privatising the state and spurring climate breakdown.

Oxfam’s analysis shows that fewer than 1 per cent of the world’s largest corporations are publicly committed to paying workers a living wage. Over the last two years, 800 million workers worldwide have lost €1.4 trillion to inflation – equivalent to 25 days of lost wages for each person. Meanwhile, corporations are distributing 80 per cent of their record profits to the pockets of their already-rich shareholders.

Corporations and their wealthy owners are also driving inequality through a war on taxation. They are incentivising a ‘race to the bottom’ in their efforts to dodge taxes while depriving the public of better public services. This is why the average corporate-tax rate in the EU has fallen by ten percentage points since 2000 – from 32 to 22 per cent – and why, in the last 30 years, seven out of eight EU countries got rid of wealth taxes. The privatisation of essential services such as education, water and healthcare – pushed by corporate power – further widens the inequality gap, as it limits access to those who can pay.   

Finally, corporate power is advancing the climate catastrophe, which is hitting the most vulnerable hardest. Fossil-fuel companies are profiting from their planet-killing business while they block progress on urgent climate action. At the same time, their ultra-rich owners are the most responsible for the climate emergency. Oxfam estimates that a billionaire emits over a million times more than the average person through their luxurious lifestyles and investments. Meanwhile, ordinary people are bearing the brunt of the disastrous effects of heatwaves, floods and landslides caused by human and corporate greed. 

Wealth and windfall taxes

The good news is we can stop this. We need governments to regain control. They must guarantee essential public services, regulate corporate power and promote democratically-owned businesses. In this, wealth and corporate taxation represent the cornerstone.    

Fair taxes are vital to breaking billionaires’ dominance and ensuring our economy does not only serve a handful of ultra-rich individuals but works for ordinary people. For example, a European wealth tax could raise nearly €300 billion a year – enough to cover 40 per cent of the EU’s Recovery and Resilience fund. This small tax, at a rate between 2 and 5 per cent on EU multi-millionaires and billionaires, would not only boost governments’ coffers to fight inequality but would also make rich polluters pay for their role in the climate crisis.

This is why Oxfam is supporting – together with economists, multi-millionaires and politicians – a European Citizens’ Initiative for a European wealth tax. Every hour governments fail to take action is literally costing millions of euros; with the petition, Europeans are calling on the EU to move to end this and tax the rich.

The same goes for windfall and excess profits of corporations. New analysis by Action Aid, in collaboration with Oxfam, shows that a 90 per cent tax on windfall profits, applied to the 36 largest companies in fossil fuels and banking around the world, could raise close to $382 billion. This is almost 20 times what was spent globally on climate adaptation in 2021.

Global effort

The scale is unprecedented and it is a global problem. To stop the world’s wealthiest and biggest corporations avoiding paying their fair share of tax we need a global effort, such as the United Nations convention on tax advocated by African countries, resisted by EU member states.

We are entering a decade of division. Taxes on wealth and corporations, along with more state, public power and sustainable business, are the only way to create an economy free from billionaire supremacy. It is time for an economy that works for ordinary people and the planet.

Author

Chiara Putaturo

Chiara Putaturo is an Inequality and Tax Policy Advisor at Oxfam International, based at the Oxfam EU Advocacy office in Brussels

This blog is adapted from an article first published on the Social Europe website. It is the latest in our series of blogs around January’s Davos summit.