A luxury yacht is docked at a downtown pier in Chongqing, China. A new report from the European Union claims thousands of the world's richest billionaires consistently use legal loopholes and shell companies to conceal wealth in order to avoid paying their full share of taxes.
File photo by Stephen Shaver/UPI | License Photo
Oct. 23 (UPI) -- A new report from the European Union claims thousands of the world's richest billionaires consistently use legal loopholes and shell companies to conceal wealth to avoid paying their full share of taxes.
The analysis by the EU Tax Observatory in Paris, led by the economist Gabriel Zucman, accuses the world's wealthiest citizens of gaming the system by moving billions of dollars in dividends and capital gains into of phantom accounts offshore as unreported income.
"These holding companies are in a grey zone between avoidance and evasion," the report said. "To the extent that they are created with the purpose of avoiding the income tax, they can legitimately be seen as closer to evasion."
Most notably, the report calls for thousands of the richest people on Earth to pay back 2% of their wealth each year for what it called "border of legality" tax practices.
The Observatory said it will present the findings of the report at the 2024 G20 summit in Brazil, where the agency will call on global leaders to impose a 2% annual tax on the world's richest people.
The proposed billionaire's tax will seek to levy an individual's full wealth rather than just simple income that must be reported on annual tax returns.
If implemented, the measure would raise more than $250 billion each year from the world's 2,756 billionaires who were believed to collectively hold $13 trillion in assets.
The EU's focus on tax evasion comes despite a decade of policy efforts to curtail tax avoidance and evasion throughout the 27-nation bloc.
Previously, 140 nations and territories signed an agreement in 2021 to impose a 15% global minimum tax on the world's richest multinational companies.
"This is the logical next step after the global minimum tax on multinational companies -- which demonstrates that it is possible for countries to agree on minimum tax rates," Zucman said in the report.
The tax enforcement arm of the EU was established in 2020 as part of a broader effort to root out tax cheats throughout Europe in an attempt to levy wealth and distribute it back into the regional economy.
As part of the effort, banks in more than 100 nations have since adopted enhanced tools to share account information and alert authorities to suspicious activities, however these steps have not succeeded in curbing overall tax avoidance by the wealthy.
According to the report, the upper echelon of the super-rich have regularly avoided specific portions of income tax through shell companies, resulting in little if any taxes paid relative to their actual total wealth.
At the same time, most wealthy citizens who don't cheat the system through tax loopholes pay anywhere from 20% to 50% in taxes to take up the slack.
"To date no serious attempt has been made to address this situation, which risks undermining the social acceptability of existing tax systems" around the world, the report warns.
Dummy corporations serve as cover for legitimate businesses on paper, but in reality they operate under fictitious names to conceal assets, hide financial transactions, and evade tax liabilities.
Shell companies frequently serve as nominal property owners, particularly for luxury real estate properties in major cities like London, facilitating the secret transfer of untold billions of dollars into offshore accounts.
"Real estate continues to provide ample opportunities for the rich to avoid and evade taxes," the report said.