The world’s richest people are under pressure to contribute some of their wealth to the international effort to tackle global issues. As the call grows louder, the question revolves around which approach is better: contribution through higher taxation or philanthropy?
The United Nations has made dire predictions of increasing unemployment and poverty following the global lockdowns. According to a UN University study, this could pose challenges to the accomplishment of the 2030 Sustainable Development Goals Agenda. Meanwhile, in the last five years the fortunes of the wealthiest people have continued to grow by billions, next to an increase in the number of billionaires worldwide.
The wealth of currently the world’s richest man, the CEO of internet giant Amazon, Jeff Bezos, is estimated at US$ 138 billion. This represents the gross domestic product of 125 of the 195 countries in the world. Bezos is as rich as Kuwait and a little wealthier than Morocco or Slovakia. In the face of so much inequality, it is not surprising that social pressure on billionaires is mounting. According to a recent survey by Dutch market researcher Glocalities in collaboration with the Global Citizen Foundation, 81% of respondents in 25 countries believe that billionaires should contribute more to the United Nations‘ Sustainable Development Goals such as clean water, education, and universal healthcare for all.
There is currently a shortfall of US$ 400 billion in the amount required to achieve the Sustainable Development Goals. The combined wealth of the world’s 2150 billionaires is estimated at a collective total of US$ 10 trillion. Whilst the amount that billionaires give to charity has continued to grow each year, the proportion of the donations compared to their total worth remains insignificant. Jeff Bezos has donated almost US$ 100 m to the food bank charity, Feeding America, which the charity said was the biggest donation it had ever received. However, the US$ 100 million donation announcement by Bezos represents less than 0.1% of his estimated fortune. Calculations show that if each billionaire agreed to give 4% of their assets, the funding shortfall for the SDGs would be met. As well as being censured for not being generous with their wealth, owners of the most profitable businesses are also criticized for having far too much power, giving low wages to employees and paying too little tax.
Philanthropy or wealth tax?
The super-rich can contribute in two ways: by philanthropy or by paying more tax. According to Glocalities’ research, there was more support for billionaires contributing through philanthropy, with 46% of respondents in favor of voluntary philanthropic donations. One third of respondents said that a wealth tax should be introduced to fund the Sustainable Development Goals. The countries most in favor of billionaires contributing to the funding of the SDGs were Indonesia, Vietnam and Portugal, while Japan, the Netherlands and the United States came last in the list of 25 countries.
In countries such as Vietnam, China and Mexico, citizens showed a preference for philanthropy. “If you live in a country where there is a lot of corruption, you don’t think positively about taxation. In such countries, many citizens also believe in a hierarchical order: there are people who stand out. For some, billionaires really appeal to the imagination. In China, appreciation for Jack Ma, founder of the internet store Alibaba, increased due to his contribution to the fight against the coronavirus”, stated Martijn Lampert, research director of Glocalities.
Will the current crisis lead to higher taxes?
Koen Caminada, professor of tax and social policy at Leiden University, expects that the current pandemic crisis will lead to a rise in taxes in order to strengthen the public sector. However, he is skeptical that wealth taxes will lead to the structural redistribution of wealth across the world and a balancing of income. Moreover, money is not sufficient to solve persistent social problems, a fact that also applies to philanthropy. International development has its fair share of other issues besides a lack of financing – corruption leads to money falling into the wrong pockets, while dependence on donors encourages passivity. Lampert of Glocalities is pessimistic about the potential of initiating a substantial wealth tax, stating that this would take years to implement.
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