Turn the Tide: The G20 must act on rising inequality, starting with fairer global tax reform | Economic Inequality | Taxes

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In the time that Australia held the G20 Presidency (2013 to 2014), the total wealth in G20 countries increased by $17 trillion, and the richest 1% of people captured a staggering $6.2 trillion of this wealth
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  1   Turn the Tide: The G20 must act on rising inequality, starting with fairer global tax reform   Executive Summary The gap between the rich and the rest is extreme and growing. G20 nations are not immune. In the time that Australia has held the G20 Presidency (between 2013 and 2014) the total wealth in the G20 increased by $17tr  i  but the richest 1% of people in the G20 captured a staggering $6.2tr of this wealth – 36% of the total increase. This is because, in the vast majority of G20 countries, the richest 1% of people took an even bigger share of the economic pie in the past year. ii  Yet G20 countries are still home to more than half of the world’s people living in poverty. iii  The G20 cannot afford to ignore the problem of inequality. These same problems exist around the world, with seven in 10 people living in countries where inequality is worse than it was 30 years ago, iv and a billion people still living in extreme poverty. Extreme inequality is also preventing millions of people from lifting themselves out of poverty, v causing a vicious cycle that must be broken.  A vivid example of the role of growing social and economic inequalities is the Ebola crisis. The virus is tearing through West Africa because countries don’t have the public health infrastructure to stop it. G20 leaders need to swiftly ensure all the personnel, equipment and funding required to halt the outbreak are made available, as outlined by the Framework for a Global Response to the Ebola Outbreak. In spite of the inequality explosion and its harmful effects, G20 countries are pursuing growth strategies that are too narrowly focused on increasing GDP rather than targeting the fairer distribution of growth that would reduce inequality and improve the lives of the poorest people, as well as the wealthy. G20 countries represent around 90% of global gross national product and 80% of world trade, giving them unrivalled policy influence over their own countries and others. Their decisions directly affect the poorest countries. The G20 must live up to its commitment to promote inclusive growth,  which requires prioritising strategies that will close the gap between the poorest 40% of people and the wealthiest. OXFAM MEDIA BRIEFING   November 2014  2   High on the G20 agenda, and essential to solving the problem of inequality, is a review of global rules to tax multinational corporations,  through the G20/OECD Base Erosion and Profit Shifting (BEPS) process. Australian Treasurer Joe Hockey has said that ‘tax evasion and avoidance is a global problem and the effects are sometimes felt hardest by the poorest people in the poorest countries’. Oxfam shares these concerns: Our research shows that developing countries could be losing more than US $100 billion every year because of corporate tax dodging and tax breaks for corporations vi . This would be almost enough to get every child into school four times over. vii  Oxfam welcomes progress made on global corporate tax reform, but the BEPS process is not sufficient to deal with the global tax issues developing countries face, or to address all of the fundamental problems that currently allow multinational corporations to get away with not paying their fair share of tax. The G20 must be willing to go beyond the OECD-led Base Erosion and Profit Shifting (BEPS) plans, and work with all countries to fundamentally re-write global tax rules, tackling the tough issues that especially matter to developing countries such as source versus residence taxation, tax competition, and ‘spillover’ effects. Merely tinkering around the edges of the fundamental reforms required is not enough. The G20 needs to show it is serious about tackling inequality by returning to its commitment to inclusive growth, and by committing to go beyond existing tax reform plans so that the tax system works for the majority, rather than privileging large multinational corporations and the richest countries. Inequality is worsening, including in G20 countries Inequality – both of wealth and income - is a problem knocking hard now on the doors of the G20 nations. In the time that Australia has held the G20 Presidency (between 2013 and 2014) the total wealth in the G20 increased by $17tr  viii  but the richest 1% of people in the G20 captured a staggering $6.2tr of this wealth; 36% of the total increase. This is because in the vast majority of G20 countries the richest 1% of people took an even bigger share of the economic pie in the past year. ix  Yet G20 countries are still home to more than half of the world’s people living in poverty. x  The G20 cannot afford to ignore the problem of inequality.  3   Wealth Share of the Top 10% (by wealth share) for G20 countries Source: Credit Suisse Global Wealth Databook 2014 Income inequality across the G20 countries shows similar worrying trends. For all of the nine G20 countries that have sufficient data available, the richest 1% of people (as measured by their income) have increased their income share significantly since 1980. In 1980 the top 1% in Australia, one of the more equal countries in the G20 at the time, earned 4.8% of the country’s income. By 2010, this group captured an additional 4% of the pie, with a share of more than 9%. In the US, the richest 1% started the 1980s with just over 8% of national income. By 2012, their share had increased to a massive 19%. xi   Source: Oxfam calculations based on data from the World Top Incomes Database 85%78%77%75%74%73%72%72%66%64%64%63%62%57%54%53%52%51%49%0%10%20%30%40%50%60%70%80%90% 0510152025      T    o    p     1     %    s     h    a    r    e     (     %     )    o     f    t    o    t    a     l     i    n    c    o    m    e AustraliaCanadaFranceItalyJapanKoreaSouth   AfricaUnited   KingdomUSA  4   The growing gap between the rich and the rest is preventing millions of people from lifting themselves out of poverty. Recent research from Oxfam has shown that in countries like Kenya, Indonesia and India, millions more people could be lifted out of poverty if income inequality were reduced. xii  Inequality hinders growth, corrupts politics, stifles opportunity and fuels instability. xiii   G20 countries need to think beyond increasing GDP and prioritise inclusive growth that will boost the living standards of the majority and not just the wealthiest Global economic stability is an urgent priority for G20 leaders. However, the Australian g overnment, as president of the 2014 G20, has refused to recommit the group of 20 to an inclusive growth agenda, and thus far has not acknowledged the impact of inequality on growth. Financial institutions such as the IMF, the World Bank and the OECD and many other G20 governments do recognise the issue as a threat to growth and among them is next year’s host, Turkey. For this reason, it is crucial that momentum on inequality is not lost this year and that the G20 commits to inclusive growth, with specific measures to be implemented and reported on next year. If G20 countries do not move to strategies that promote inclusive growth, there is growing evidence that they risk damaging the prospects for sustainable xiv  economic growth, not to mention ignoring the injustice of social and economic inequality. Extremes of inequality are bad for growth and bad for achieving cohesive, democratic societies . xv  In countries with extreme economic inequality, growth is not sustained and future growth is undermined. xvi  Earlier this year, the IMF said that it would be a mistake to focus on growth and let inequality take care of itself, because the resulting growth may be ‘low and unsustainable’. xvii  G20 countries need to commit to monitoring the impact of additional growth on the bottom 40% and the top 10% in their respective countries, and commit to closing the gap. Signing up to a post 2015 Millennium Development Goal that states their commitment to do just that would be an easy first step for each of them to take. To date there has been insufficient focus by the G20 on reducing inequality  between women and men . Across the G20 and beyond, women are paid less than men, do most of the unpaid labour, are over-represented in part-time work and are discriminated against in the household, markets and institutions. If present trends continue, it will take 75 years for the principle of equal pay to become a reality. xviii  Policies are needed to eliminate the barriers to women's economic equality. The recent announcement that G20 leaders are tackling gender inequality by aiming for a target to reduce the gender pay gap by 25 per cent by 2025 is certainly a welcome first step. For the target to work, it will have to be accompanied by truly bold social policies that, for example, support fully accessible and affordable child care for all mothers and families, including the very poorest. There is also a need for the G20 to make other commitments such as closing the gender pay gap, recognising women’s unpaid care work and guaranteeing equal political representation and fair living wages in the workplace. The world’s growing social and economic inequalities have also been linked to the Ebola outbreak.
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