Inequality Kills - The Latest Report from Oxfam

In advance of the World Economic Forum in Davos each year, Oxfam produce their report on global inequality. This year was no exception, and the report focuses on the rise in inequality in the wake of Covid-19. One of the main findings of the report is that the wealth of the world’s 10 richest men has doubled since the pandemic began, while the incomes of 99 per cent of the global population have declined due to the pandemic.

 

The report - Inequality Kills: The unparalleled action needed to combat unprecedented inequality in the wake of Covid-19 - looks at widening economic, gender and racial inequalities, as well as inequality that exists between countries, which, the authors say, are tearing our world apart. Among the main findings of the report are (summarised on page 10):

• The wealth of the 10 richest men has doubled, while the incomes of 99% of humanity are worse off, because of COVID-19.
• The 10 richest men in the world own more than the bottom 3.1 billion people.
• If the 10 richest men spent a million dollars each a day, it would take them 414 years to spend their combined wealth.
• If the richest 10 billionaires sat on top of their combined wealth piled up in US dollar bills, they would reach almost halfway to the moon.
• A 99% windfall tax on the COVID-19 wealth gains of the 10 richest men could pay to make enough vaccines for the entire world and fill financing gaps in climate measures, universal health and social protection, and efforts to address gender-based violence in over 80 countries, while still leaving these men $8bn better off than they were before the pandemic.

These figures are startling and give a keen insight into the global gap between rich and poor. The report further analyses the position taken by wealthier countries to protect the profitability of private companies rather than make a vaccine widely-available to poorer countries in the middle of a pandemic, a form, it says, of "vaccine apartheid".

Economic Violence

Considering what it terms "economic violence", the report estimates that 5.6 million people die every year due to lack of access to healthcare in poorer countries; hunger kills over 2.1 million people each year; and, by 2030m the climate crisis could kill 231,000 people each year in poor countries.

This violence is not just an issue for poorer countries, although it is certainly they who pay the highest price, but through sustaining the position of vaccine hoarding, richer countries continue to put themselves at risk of Covid mutations. Immediate economic impacts, such as additonal healthcare, welfare, and employment supports continue to be borne by wealthier countries as lock-downs persist, while the longer-term economic impact of school closures and labour-market scarring are, as yet, unknown. 

Death by Inequality

The report estimates that inequality contributes to the deaths of 21,300 people each day - one every four seconds. Many of these deaths are preventable if different decisions on wealth distribution were made.

Equality Solutions

The report sets out some solutions which the authors believe would "combat economic violence at its roots" and help produce a more sustainable and equal world. These include:

1. Using the tax system to claw back extreme wealth through the use of windfall gains taxes on the gains made by the super-rich during the pandemic, and using those gains to support greater global equality. An example provided is of a 99 per cent windfall gains tax on pandemic profits which could generate $812 billion for global equality initiatives.
2. Redirecting wealth to save lives and invest in our future by investing in evidence-based policies. One legacy of the pandemic could be the establishment of publicly-funded and publicly-delivered universal healthcare so that no person would need to pay a fee and everyone would be assured of healthcare at a time of need.
3. Governments should look to shift the power dynamics in the economy and society so that this collossal wealth-creation by the very few, often at the expense of the many, is no longer possible. To this end, the report calls for greater gender equality; rescinding laws that prohibit or discourage workers from unionising; addressing monopolies and limiting market concentration; and tackling barriers to representation

Introducing a Wealth Tax

The latest blog by the Nevin Economic Research Institute (NERI) also considers the introduction of a wealth tax. It points to Capital Acquisitions Tax (CAT) of 33 per cent on gifts and inherited wealth in Ireland, notwithstanding the "very generous" tax-free threshold of €335,000 for children, as a form of wealth taxation currently in place. However, the range of tax reliefs and loopholes in the system, available to those with the resources to take advantage of them, undermines the efficacy of such a tax and the notion of equity.

According to NERI "A recurrent tax on net household wealth would have important political economy benefits. In particular, the perception of social solidarity would make it far easier to introduce other desired tax and welfare reforms.", however they are also quick to point out that care must be taken to ensure that the form of any new wealth tax imposed does not continue to be undermined by its ability to be avoided.

Tackling Inequality through Taxation

Social Justice Ireland believes that there is merit in developing a tax package which places less emphasis on taxing people and organisations on what they earn by their own useful work and enterprise, or on the value they add or on what they contribute to the common good. Rather, the tax that people and organisations should be required to pay should be based more on the value they subtract by their use of common resources. Whatever changes are made should also be guided by the need to build a fairer taxation system; one which adheres to our core policy objective:

To collect sufficient taxes to ensure full participation in society for all, through a fair tax system in which those who have more pay more, while those who have less pay less.

If the challenges and needed reforms are to be effectively addressed, Social Justice Ireland believes that Government’s key policy priorities in this area should be to:

• Increase the overall tax-take. 

  We have proposed a new tax take target set on a per-capita basis; an approach which minimises some of the distortionary effects that have emerged in recent years. Our target is calculated using CSO population data, ESRI population projections, and CSO and Department of Finance data on recent and future nominal overall taxation levels. The target is as follows:

  Ireland’s overall level of taxation should reach a level equivalent to €15,000 per capita in 2017 terms. This target should increase each year in line with growth in GNI*.

  As part of our calculations, we have adjusted the expected Department of Finance tax take to remove an estimate of the windfall short-term corporate taxes the state is currently receiving; revenues which are likely to go elsewhere as the broader OECD and EU reforms of corporate taxation regimes advances. We have chosen a conservative figure of €4.5billion to make this adjustment. In 2021 the overall tax gap is €5.4 billion and the average gap over the period 2019-2021 is €6 billion per annum.

• Reform and Broaden the tax base. 

  There are a number of approaches available to Government in reforming the tax base. Recent Budgets have made some progress in addressing some of these issues while the 2009 Commission on Taxation Report highlighted many areas that require further reform. The areas we consider a priority are presented below, greater detail on our proposals is available in Chapter 4 of our Socioeconomic Review 2021:

  • Tax Expenditures / Tax Reliefs
  • Minimum Effective Tax Rates for Higher Earners
  • Corporation Taxes
  • Site Value Tax
  • Second Homes
  • Empty Houses and Underdeveloped Land
  • Taxing Windfall Gains
  • Financial Transactions Tax
  • Carbon Taxes
• Build a Fairer Taxation System. 

  The need for fairness in the tax system was clearly recognised in the first report of the Commission on Taxation almost four decades ago. It stated:

  “…in our recommendations the spirit of equity is the first and most important consideration. Departures from equity must be clearly justified by reference to the needs of economic development or to avoid imposing unreasonable compliance costs on individuals or high administrative costs on the Revenue Commissioners.” (1982:29)

  The need for fairness is just as obvious today and Social Justice Ireland believes that this should be a central objective of the current reform of the taxation system. This could be achieved by:

  • Standard rating discretionary tax expenditures
  • Favouring fair changes to income taxes
  • Introducing Refundable Tax Credits
  • Reforming individualisation
  • Making the taxation system simpler

For the most part, society at large gains little or nothing from the discrimination contained in the tax system. Mortgage interest relief, for example, and the absence of any residential or land-rent tax contributed to the rise in house prices up to 2007. Complexity makes taxes easier to evade, invites consultants to devise avoidance schemes and greatly increases the cost of collection. It is also inequitable because those who can afford professional advice are in a far better position to take advantage of that complexity than those who cannot. A simpler taxation system would better serve Irish society and all individuals within it, irrespective of means.