The sharp disparities in the distribution of income in Latin America, aggravated by the coronavirus pandemic, are raising calls for a solidarity tax on wealth.
• Read also: Argentina approves law on large fortunes to fight virus
The Latin American Network for Economic and Social Justice (Latindadd) revealed at the end of 2020 that 1% of the richest on the subcontinent own 41% of the wealth. However, this group contributes only 3.8% in public revenue.
Globally, great fortunes have so far emerged unscathed or even strengthened from the pandemic, revealed in January the NGO Oxfam, estimating that “the poorest could take a decade to recover”.
Billionaires even saw their fortunes increase by $ 3.9 billion between March 18 and December 31, 2020, according to the NGO.
Like many supporters of direct redistribution mechanisms, Latindadd is pushing for a “tax on the wealthy,” which Oxfam says would help fight “the virus of inequality.”
In Latin America, this mechanism would raise more than $ 26.5 billion, which Latindadd said would be enough to distribute the vaccine against COVID-19 for free.
But if a special tax on large fortunes has been introduced in Argentina and Bolivia, its principle is called into question in countries like Brazil and Chile, which are particularly unequal. Not to mention the many Latin American countries where the issue is not even on the agenda.
In Argentina, the center-left government of Alberto Fernandez hopes to raise $ 3 billion this year with an “extraordinary” tax that is to affect some 12,000 large wallets and intended to finance the fight against the COVID-19 pandemic, aid to SMEs or scholarships.
Even more specific is the tax introduced by Bolivian President Luis Arce, which will only affect 152 people with assets over $ 4 million and only bring in $ 14.3 million, making it a rather symbolic measure.
” Property tax ”
In Brazil, proposals have made little headway in Congress and are not included in tax reform plans. However, “the introduction of taxes on (…) large fortunes” is written into the Constitution of 1988, introduced by a law that was never approved for fear of capital flight.
In Chile, left-wing opposition parliamentarians last year proposed a transitional tax on the “super-rich” at 2.5% for those with more than $ 22 million in assets. But the idea, which aims to generate some $ 6.5 billion to support the fight against COVID-19, has not flourished.
For Alejandro Rasteletti, expert in fiscal policy at the Inter-American Development Bank (IDB), an organization that works on the subject, discussions around a tax on large fortunes are “welcome” in an unequal region where “fiscal policy has a very low redistributive impact ”.
“The tax on large fortunes makes the system more progressive” (it aims to make those who have the most pay more, editor’s note) but “it is not as redistributive as desired because in practice it is relatively difficult to collect because we can avoid it in different ways ”, he explains.
As proof, according to this specialist, in Europe, collection by this mechanism only reaches 0.2% of GDP, a “very low” volume.
“Within the IDB, we have been pushing for a property tax for a long time […] which is very difficult to evade (and) which is absolutely progressive, because the bigger houses belong to the wealthier people, ”he said.
Fearing a social explosion, the global economic and political elite expressed their concern at the Davos Economic Forum in January at the worsening inequalities.
“Instead of crying crocodile tears, the masters of the world should get down to work,” French economist Thomas Piketty, specialist in the study of economic inequalities, who advocates a universal tax, responded to AFP. on part of tax revenue […] of the most prosperous economic players on the planet ”.