Taxation of the super-rich: Brazil will collaborate with Spain on tax reforms for large fortunes

The governments of Brazil and Spain signed a memorandum of understanding to expand cooperation in policies for taxing large fortunes.

Taxation of the super-rich: Brazil will collaborate with Spain on tax reforms for large fortunes

TL;DR

  • Brazil and Spain signed a memorandum of understanding to expand cooperation on taxing large fortunes and progressive taxation.
  • The goal is to create an international coalition to reduce income and wealth concentration.
  • Initiatives include technical knowledge exchange, studies, and cooperation with international organizations (UN, OECD).
  • The agreement aims to advance effective taxation of high-net-worth individuals and encourage other countries to join.
  • Key proposals involve international minimum taxation standards for the extremely wealthy, like the 2% wealth tax suggested by Gabriel Zucman.
  • The OECD report highlights that in many countries, the richest pay proportionally lower taxes than lower-income individuals, partly due to low taxation on capital income.
  • The agreement outlines commitments including tax reforms, technical exchange, data access, policy review, information sharing, international action, fiscal justice promotion, institutional cooperation, and capacity building.

The governments of Brazil and Spain signed a memorandum of understanding to expand cooperation in policies for taxing large fortunes, the so-called “super-rich,” and to stimulate progressive taxation (which falls more on higher incomes).

The idea is to articulate an international coalition that discusses ways to reduce the concentration of income and wealth. The joint document was signed by Brazil's Minister of Finance, Dario Durigan, and Spain's Minister of Finance, Arcadi España.

Among the initiatives foreseen are, in addition to this, the exchange of technical knowledge, the carrying out of studies, and cooperation with international organizations, such as the United Nations (UN) and the Organization for Economic Cooperation and Development (OECD).

According to the Brazilian Ministry of Finance, the objective is to advance in the effective taxation of people with high net worth and encourage other countries to participate in the discussions.

The agreement will be valid for three years, with the possibility of renewal by mutual understanding between the two governments.

One of the proposals that gained international prominence for taxing large fortunes came from the French economist Gabriel Zucman, who stimulated, during Brazil's presidency of the G20 in 2024, the adoption of an international minimum taxation standard for people with extremely high net worth, with a charge equivalent to 2% of wealth per year.

Zucman advocated for minimum wealth taxation as a way to address global inequalities and increase resources available to finance public services.

Super-rich do not have a universal classification criterion, but in Brazil, the government adopts a monthly income above R$ 50,000 (or R$ 600,000 per year). Progressive taxation can reach a minimum tax of 10% for those with income starting from R$ 100,000 per month (R$ 1.2 million per year).

In the G20, the adopted definition is net worth above US$ 1 billion, that is, a very small group of global magnates.

According to studies by the Getulio Vargas Foundation (FGV), the richest 0.01% of the Brazilian population concentrate personal income above R$ 2.1 million per month.

In a report published in July 2024, the OECD analyzed the relationship between taxation and inequality at the request of the Brazilian presidency of the G20. According to the report Taxation and Inequality, in several countries, the taxation of the richest is proportionally lower than that applied to people with lower incomes. In other words, those who earn more may pay less taxes proportionally to their income, even if their total contribution is higher.

One of the explanations would be the low taxation on capital income, such as dividends and investment gains, compared to the taxation on labor income.

“It is simply unacceptable that the super-rich continue to pay proportionally less taxes, and international cooperation is an indispensable pillar for us to build fairer and more balanced tax systems,” said Durigan during the signing of the document.

The Spanish minister, in turn, stated that “it is impossible to have social justice if we do not ensure that large fortunes contribute equitably”.

See the commitments foreseen in the agreement:

  • Tax Reforms: facilitate the development of evidence-based measures to increase fiscal progressivity and improve the taxation of people with large fortunes;
  • Technical Exchange: bring together researchers, specialists, and public managers from both countries to discuss fiscal policies and share knowledge;
  • Access to Data: discuss access to administrative tax microdata to more accurately estimate the effective rates paid by the wealthiest taxpayers;
  • Policy Review: create opportunities for countries to evaluate each other's experiences;
  • Information Sharing: exchange knowledge on international taxation trends;
  • International Action: strengthen cooperation with international organizations;
  • Fiscal Justice: promote debates on progressive taxation and sustainable development;
  • Institutional Cooperation: share knowledge in meetings, seminars, and workshops;
  • Capacity Building and Public Dialogue: train public servants and maintain open dialogue with civil society on taxation-related issues.