World Inequality Report

Syllabus: General Studies Paper 3

Context:

 The latest World Inequality Report 2022 states that Since the mid-1990s, the richest 1 per cent captured 38 per cent of wealth growth at the global level.

Key Highlights of the report

• Global billionaire wealth in 2021 represents 3.5 per cent of the world’s household wealth, with the share of the global top 0.01 per cent up from 7 per cent of global wealth in 1995 to 11 per cent this year.
• The report suggested developing new forms of wealth taxation on multimillionaires, including a progressive rate of wealth tax with tax rates according to the value of the total amount of wealth owned.
• Proposal: 
  • The time is right to develop new forms of wealth taxation, to modernise our tax system, to take stock of what has been happening in the economy over the past decades.
  • What has been happening is a higher concentration of wealth, more wealth inequality and our tax systems so far in most countries in the world have not adapted to this.
  • It makes sense when the governments are looking for money, looking for how to repay the debt of Covid.
  • A global wealth tax on multi millionaires, people who own more than a million dollars or euros and this tax in this proposal is progressive, meaning that the rates are going to be according to the value of the total amount of wealth that you own.
• In countries, where wealth is highly concentrated, more rates on the stock of wealth of very wealthy individuals can deliver high amounts of revenues.
• As per the report, the richest 10 per cent own around 60-80 per cent of wealth and the poorest half systematically own less than 5 per cent of wealth.
• The government intervention is key to tackle inequality with social and tax policies.
• Women today get just one-third of all labour income in the world whereas gender parity would mean they get half of that.
• But currently women earn just one-third of all incomes from work and the situation has increased since the 1990s but at a very slow rate. If we continue at this rate, we need to wait at least a century to reach gender parity.

Furthermore

• Tax ranging from 1 per cent of wealth owned over $1 million to 3 per cent for global billionaires can generate 1.6 per cent of global income.
• Wealth taxation in unequal societies helps tackle extreme inequality and generate substantial revenues to invest in the future.
• The report finds that he average increase in the wealth of billionaires is over 9 per cent per year.
• So, taxing them at 3.5 per cent still means their wealth is going to increase in coming years.
• The wealth tax can raise significant amount of money to invest in climate investments for bottom 50 per cent of the population, in education and also in health.
• The report finds that the 15 per cent minimum corporate tax deal is very low as compared to the statutory tax rate paid by low-end and middle-size companies/corporations.
• As per the estimates in the report, a 15 per cent minimum corporate tax would lead to revenue gains of 83.3 billion euros in EU, 57.0 billion euros in the US, 6.1 billion euros in China and 0.5 billion euros in India.
• The global bottom 50 per cent income share remains historically low despite growth in the emerging world in the past decades.
• The share of global income going to top 10 per cent highest incomes at the world level has fluctuated around 50-60 per cent, while the share going to the bottom 50 per cent lowest incomes has generally been around or below 10 per cent.
• The top 0.1 per cent of the global population captures more income than the entire bottom 50 per cent.
• The average annual wealth growth rates among the poorest half of the population were between 3 per cent and 4 per cent per year between 1995 and 2021.
• The poorest half of the world population only captured 3 per cent of overall wealth growth since 1995.
• The share of wealth detained by the world’s billionaires rose from 1 per cent of total household wealth in 1995 to nearly 3.5 per cent today.

The Indian Express link-

https://indianexpress.com/article/business/top-1-captured-over-a-third-of-wealth-growth-7651633/

Question- Reducing inequality needs taxing High Net Individuals and ensuring government benefits reach the needy and vulnerable. Elucidate.