Tax inequality, Argentina's Response,

According to Oxfam the wealth of the world's 10 richest individuals has risen by £400bn since the start of the pandemic. That sum could apparently vaccinate every adult on Earth, as well as restore to the world's poorest people the income they lost in 2020... It is hard to quarrel with the report's conclusion that current economic policies have enabled "a super-rich elite to amass wealth in the middle of the worst recession since the Great Depression, while billions of people are struggling to make ends meet.

Political economists on both the left and the right are coming to the conclusion that the gap between rich and poor people is destabilising and dangerous to democracy...The world is getting less equal...

Vague Oxfam exhortations that we need to "shape more equal societies" are unlikely to get anywhere. Whatever Davos may pretend, the world does not have one government or one tax regime, let alone one ideology...

Duty Paid
Ralph Hedley (1848-1913)
Photo Credit:Sunderland Museum & Winter Gardens [CC BY-NC]

The world's most successful industries - largely the concern of the top 10 wealthy individuals - are still operating virtually tax-free. The reason at root is that these industries are global, while taxation is national. Tax regimes tend to be deeply conservative, continuing to undertax wealth, notably property, and overtax lower and middle incomes. Fiscal authorities, such as Britain, are also cynically indulgent towards tax avoidance and money laundering, while loading taxpayers with regressive imposts such as council tax and VAT...

It is for governments to try to track down and police those who, far from not paying enough tax, pay little or none at all. They grow rich by keeping their wealth offshore...

There are three possible answers to the question of how to increase the contribution of the super-rich:shrug, shame or tax . Shrug is easy. It has ruled policy in Britain ever since the days of 80% surtax ended in the 1980s. Shame is dubious...

As for higher personal taxes, Oxfam argues that if Argentina can levy a one-off emergency surtax on its 12,000 richest citizens, so surely can the richer countries of the world...A surtax must be the answer.

(Simon Jenkins, The Guardian, 2021)

(See Wealth Gap, Jan 22, Taxing Millionaires, Jan 15 and Tax Rises, Oct 6, 2020)

*A one-off tax on Argentina's richest people comes into effect to help pay for medical supplies and relief for businesses struggling due to Covid-19.

Those with assets of more than 200 million pesos ($2.3m; £1.67m) will have to pay about 3% on assets declared within the country and over 5% on assets held abroad.

It will apply to around 12,000 people.

The government hopes to raise around $3bn. The money will also help fund scholarships and social aid.

Senators passed the one-off levy - dubbed the "millionaires' tax" - by 42 votes to 26 in December.

The measure brought in by centre-left President Alberto Fernandez has been criticised by the opposition which described it as "confiscatory".

There have also been concerns raised by the Argentine Rural Society that the tax could be made permanent.

But the country has been badly hit by the pandemic, which has deepened already high rates of poverty. Almost 40% of the country's population lives under the poverty line, while the unemployment rate sits at 11%.

Oxfam's annual report on economic inequality said Argentina was showing the way towards progressive taxation of the rich as the key to an equitable recovery from the current crisis.

"A tax on the excess profits earned by corporations during the coronavirus pandemic could generate $104 billion - enough to provide unemployment protection for all workers, and financial support for all children and elderly people in the poorest countries," the report stated.

Argentina has almost two million confirmed cases and more than 47,000 deaths from the virus.

(BBC News, Latin America, 2021)

*Sir, Paul Johnson's article made some good points about simplifying and reforming the tax system to assist in raising the revenue to help to repair the nation's finances. However, he avoided touching on one particularly sensitive point: that the basic rate of income tax used to be 25 per cent. The governments of John Major and subsequently Gordon Brown reduced the rate to 20 per cent while failing to recognise the future cost of an ageing population and healthcare needs. If we want to afford the level of public services that people demand then taxes on all incomes surely need to be raised, perhaps with an increase in the personal allowance to ensure that the poorest in society are unaffected.

(DJB Shearer, Glasgow, The Times, 2021)