It's time to make sure billionaires pay their fair share of taxes

I vividly remember its annual winter campaigns, where everyone, despite their own difficulties, gave a bit to support those in need.

An annual tradition in many French households, we eagerly tuned in to watch the star-studded concert, featuring French music and cinema icons, along with other famous personalities, all performing to raise funds for the cause.

Every French person knows their anthem: “Aujourd’hui, on n’a plus le droit ni d’avoir faim, ni d’avoir froid” – “Today, it’s no longer acceptable to go hungry or be cold.”

Founded by the legendary comedian and actor Coluche, who tragically passed away in a traffic accident just months after creating Les Restos du Cœur, it wasn’t supposed to last.

But it continues to exist, a testament to the ongoing struggle faced by many who cannot afford the basic necessity of putting food on the table for themselves and their families.

And today, the situation is dire. Just last month, the director of the Restos du Cœur sounded the alarm. The charity, faced with an ever-growing demand for food assistance, was teetering on the brink of bankruptcy.

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By the end of 2022, a shocking 2.4 million people had to resort to food banks, a number that had tripled in the last decade. This crisis rightly attracted a lot of media attention.

This is when Bernard Arnault, the richest man in Europe, maybe in the world depending on the day (sometimes Elon Musk gets the top of the board), stepped up with a generous €10m donation to the Restos du Cœur. “Phew! It is a huge relief, isn’t it? See, the ultra-rich aren’t that bad.” Well, it is definitely a helping hand, no doubt about it. But let’s put this in perspective.

A June 2023 report estimated Arnault’s personal fortune, along with his family’s, to be a staggering €203 billion. If we crunch the numbers, we find that the €10m contributed by the CEO of LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury goods company, represents a meagre 0.004% of their wealth. To contextualise this, it is as if your average French person donated a tenner to fight food poverty.

Arnault is doing extremely well. His wealth increased by a whopping €54bn in just one year, from 2022 to 2023. Do you struggle to imagine how much this actually is?

I certainly do. This means that today, he is earning €102,000 every single minute.

That is why many on the left had a sort of slow clap moment when his donation was announced. It ignited a larger debate about whether we should be waiting for occasional acts of generosity from the ultra-rich, while the majority of people feel they aren’t contributing their fair share.

The parent company of Louis Vuitton was caught up in tax avoidance allegations (Image: Pexels)

This sense of unfairness, the idea that we are forgoing much-needed income in the face of a cost of living crisis and the crucial imperative to transition to a net-zero future, erodes the social contract.

This is precisely what a recent report from the European Taxation Observatory, led by economist Gabriel Zucman, delves into. More than a hundred researchers from around the world, working with the Paris School of Economics, initiated this report in March 2021, co-financed by the European Commission.

One key point the report, the preface of which was written by Nobel laureate Joseph Stiglitz, insists on is that billionaires pay minuscule taxes on their wealth, often ranging from 0% to 0.5%. They achieve this through various tax optimisation strategies, shielding income sources like dividends from taxation.

When considering all taxes, billionaires end up with a significantly lighter tax load compared to the middle class.

Taxing just 2% of the wealth of the 2756 global billionaires, whose collective fortune totals $13 trillion, could potentially generate €250bn.

The “Paradise Papers” in 2017 uncovered that even our most generous Arnault himself had assets in at least six tax havens.

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A year later, a report from the French Court of Auditors exposed the Louis Vuitton Foundation for allegedly helping LVMH evade €518m in corporate taxes, which would account for roughly 8.1% of the total tax benefits granted by the government to businesses for corporate sponsorship during this period.

This suggests that potentially hundreds of millions of euros in taxes go uncollected, putting a €10m donation in a different light when you consider how much more could be contributed if tax avoidance were addressed.

Taking on tax avoidance is a perfectly sensible thing to do. Has there been a better time to take it seriously? Asking individuals and companies to contribute their fair portion shouldn’t be met with controversy or dismissed as dreamy idealism. In fact, it is rather unbelievable that we didn’t address this matter more urgently in the past, given the real dangers that it could represent.

As Stiglitz aptly notes, if citizens begin to doubt that everyone, especially the wealthy and large corporations, is paying their fair share of taxes, it could lead to widespread rejection of taxation.

This could severely undermine the functioning of democracy and erode trust in institutions. And citizens are supposed to be grateful for one big donation at the height of media attention?

We are having to deal with an array of challenges right now, and tax avoidance diminishes crucial tax revenues needed to confront an ever-mounting pile of issues.

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Sometimes I feel we are facing the impossible. The pandemic has worsened inequalities and public deficits. Governments are desperate to find ways to replenish public funds to support inflation-hit households, while at the same time securing the vast resources needed for the transition to a greener economy.

The silver lining, however, is that the world appears to be shifting its approach, notably through a comprehensive global tax reform.

Initiated under the Organization for Economic Co-operation and Development (OECD) in 2016, signed by 140 countries in 2021, and approved by the European Union in December 2022, this reform is about to be implemented in just a few months. It stipulates that profits declared by multinational corporations, regardless of their location, will be subject to a uniform minimum tax rate of 15%.

So, for example, an American company currently avoiding taxes by storing profits in a tax haven will have to give 15% of those profits to the United States. Or a British company paying 9% tax in a low-tax country will now owe the United Kingdom the remaining 6% in taxes.

While each country is free to set its own tax rate, falling below the global minimum will trigger compensation to the affected states. In theory, this will greatly reduce the allure of tax havens.

We have had a tendency of thinking that tax avoidance by both multinational corporations and wealthy people is an inevitable side effect of globalisation.

But the truth is that it is fundamentally a result of political choices, as the upcoming changes are showing. If anything, I think this is great news … It is the kind of thing that makes me want to let my optimism run wild and hope that we are about to see an important move towards “building back better” – crazy! Don’t blame me for trying to find some hope wherever I can!

Is the new reform solving everything? No, not at all, because a relatively low global tax rate and a number of loopholes that limit its impact.

But it still represents a significant step in the right direction. We can only hope that the world will be able to build on it.