The world is going through a time of profound transformations, marked by multiple and interrelated crises: climate change, pandemics and the growth of inequality. All of them require investments in public goods to address them. Money. That is why one of the most necessary transformations of the present is the reform of tax rules at the international level. What role does Chile play in this scenario?
The current international tax system is almost a hundred years old. It was designed for a globalization that has little to do with current globalization. Being old, it allows large multinationals and super-millionaires to use all kinds of accounting tricks to avoid paying their taxes. It is a “broken” system, based on bilateral treaties and standards dictated by multilateral organizations. That model, tailored to the most developed countries, has shaped the rules in its favor. The complexity and anachronism of this mechanism has facilitated tax abuse by multinationals and people with large assets who use tax hideouts to evade paying their taxes where they should: in the countries where they have economic activities or reside. This situation has limited an immense portion of the planet from its ability to finance development and provide essential public services.
However, we are at a “turning point” moment. Cooperation between countries has driven great advances in the fight against tax evasion and in the search for agreements to more fairly and efficiently tax multinational corporations, the digital economy, and the wealthiest individuals. The voting in the UN General Assembly to create a framework tax convention is a fundamental step in this process, as is an unprecedented initiative led by the Brazilian presidency of the G20 to tax the world’s super-rich.
Why is Chile crucial in this context?
Because this issue has been and is a priority of President Gabriel Boric. The country is one of the drivers, along with Colombia and Brazil, of the PTLAC, the Tax Cooperation Platform of Latin America and the Caribbean created last year in Cartagena de Indias. This year of great achievements for the field of tax justice is an opportunity for Chile to contribute to institutionalizing tax cooperation in Latin America, something that Europe and Africa have been doing for decades.
Already in his intervention at the Summit of the Americas 2022, President Boric highlighted the importance of combating tax havens and creating a “pact” to stop transnational tax evasion. Chile is a member of the OECD and the G77. It is strategically located to build bridges between developed and developing countries. This is not a minor topic. International discussions on taxes have revealed a clear divide between advanced and emerging economies. It was the countries of the Global South, led by the African Union, who decided to move negotiations on a new tax architecture from the OECD, the club of rich countries, to the UN, a forum with more legitimacy and universal membership.
Finally, Chile should support the initiative that Brazil is promoting since its G20 presidency to tax the world’s super rich. Germany, France, Spain and South Africa among others have already done it. A global wealth tax on billionaires could go a long way toward addressing growing global inequalities. According to Gabriel Zucman, a colleague of mine on the Independent Commission for the Reform of International Corporate Taxation (ICRICT), if billionaires paid the equivalent of at least 2% of your wealth Some $250 billion in additional tax revenue would be generated globally. These are less than 3,000 individuals and half of everything required to face the consequences of climate change would be raised.
Chile can play a leading role in the reform of international taxation. This is the time to make our contribution to a global tax system that generates the resources to repair inequalities, confront climate change and fight poverty.
