In a recent legal showdown at the US Supreme Court, the debate over tax justice has taken center stage, echoing Justice Oliver Wendall Holmes’ timeless assertion that “taxes are what you pay for a civilized society.” The case in question, Moore vs United States, delves into the legality of the 2017 mandatory repatriation tax, reigniting discussions on the complexities of taxing the world’s wealthiest citizens.
The 2017 repatriation tax aimed to capture trillions in offshore profits from major US corporations, anticipating a reduction in the corporate tax rate. The Supreme Court now grapples with the question of whether taxing unrealized earnings is legally sound, with potential repercussions for the broader conversation on wealth taxation.
The plaintiffs, an American couple facing a $15,000 tax bill on unrealized gains in an Indian manufacturing business, challenge the constitutionality of the repatriation tax. However, a ruling against it could pose challenges for implementing a wealth tax, a proposal championed by Democrats, and trigger widespread legal ramifications.
The backdrop to this legal saga is the more significant issue of tax justice in an era marked by decades of globalization and technological advancements. Large corporations and affluent individuals have leveraged a zero-sum game of tax arbitrage and avoidance, exploiting international structures and loopholes. The recent EU Tax Observatory’s Global Tax Evasion Report reveals a startling shift, with US multinationals now booking over half their profits in tax havens.
While a global minimum tax of 15 percent was agreed upon by 140 nations in 2021, its practical implementation remains a hurdle. The US and other wealthy nations have yet to fully enforce this measure, and an expanding list of loopholes continues to incentivize profit-shifting practices.
Notably, the report highlights that despite a slight reduction in offshore hiding, global billionaires still pay a meager 0 to 0.5 percent of their wealth on average. The complexity of legal structures employed by corporations and individuals calls for straightforward rules and heightened global coordination, acknowledging that the rich are less anchored to specific countries or tax jurisdictions.
The pressing need for increased tax revenue to address current crises, from climate change to conflicts and workforce reskilling, underscores the importance of fair contributions from the global elite. As the world grapples with these challenges, the failure to ensure that everyone pays their fair share may lead to a society increasingly perceived as uncivilized.
Source ( Financial Times News).
