International Economists Urge Adoption of UN Model Wealth Tax Law to Tackle Global Inequality

The International Commission for the Reform of International Corporate Taxation (ICRICT) has strongly advocated for swift action in the formulation of a UN Model Wealth Tax Law. This call is articulated in a letter penned to the Co-chairs of the UN Committee of Experts on International Cooperation in Tax Matters, signed by prominent economists and Co-Chairs of ICRICT, Jayati Ghosh, and Nobel Laureate Joseph Stiglitz.

Recommendation for International Tax Standards

In their missive, the economists commend the UN Tax Committee for its commendable efforts in shaping international tax standards to meet contemporary challenges. They highlight recent initiatives such as Article 12B, addressing the taxation of the digital economy, and the Subject to Tax Rule for minimum taxation in treaties. Of paramount importance is the issue of wealth inequality, for which the letter stresses the critical need for technical guidance on effective wealth taxation.

Acknowledging the intricacies involved in implementing such measures, particularly for tax administrations in developing countries constrained by resources, Ghosh and Stiglitz underscore the necessity for practical tools to facilitate the global adoption of wealth taxes.

They advocate for the creation of a UN Model Wealth Tax Law, drawing upon the Committee's draft guidance on wealth taxation, which would furnish nations with a ready-made framework adaptable to their unique contexts.

Advocating a Model Law for Wealth Taxation

The economists implore the Committee to throw its weight behind the advancement of this Model Law during the 28th Session, recognising its potential to catalyse global efforts in wealth taxation. They outline a proposed timeline aiming for the completion of the first draft by October, with finalisation targeted for March 2025.

In a recent development, the United Nations has embarked on drafting a UN Framework Convention on International Tax Cooperation, a move welcomed by the ICRICT.

The Independent Commission for the Reform of International Corporate Taxation (ICRICT) comprises a consortium of global thought leaders emphasising the urgent need for reforming the international corporate tax system. ICRICT seeks to foster inclusive dialogues, prioritise global public interest, and devise equitable tax solutions for development.

Why Is Wealth Taxation Imperative?

In recent years, there has been a resurgence in discussions surrounding progressive wealth taxation. While progressive wealth taxes have seen a decline in affluent nations, they still persist in varying forms in several countries, including the Netherlands, Norway, Spain, and Switzerland, as indicated by the World Inequality Report 2022.

For example, the recent, “Economic Inequality in India Report”  released by World Inequality Database paints a bleak picture. It says, by 2022-23, top 1% income and wealth shares (22.6% and 40.1%) are at their highest historical levels and India’s top 1% income share is among the very highest in the world. In India, the bottom 50% of the population scarcely possesses any wealth, accounting for just 6.5% of the total, while the wealthiest 1% control a staggering 39.5% of all wealth.

Image: India Top 1% Richest, Own 39.5% Wealth  

Image Credit: Economic Inequality in India Report 2024 

Amidst the backdrop of increasing wealth inequality exacerbated by the COVID-19 pandemic, the imperative for comprehensive wealth taxation becomes even more pronounced. The concentration of wealth among a privileged few has exacerbated existing disparities, presenting formidable challenges to social cohesion and economic stability. Ghosh and Stiglitz’s urgent plea for action underscores the growing recognition of the necessity to address these inequalities through equitable tax policies and international cooperation.