G7 leaders are fuelling inequality and holding back efforts to beat poverty at home and around the world, according to a new report published today by Oxfam ahead of the G7 summit in Biarritz.
President Macron has made fighting inequality a priority at this year’s gathering, but the international agency warns that unless leaders deliver concrete action to close the gap between the ‘haves’ and the ‘have-nots’ it threatens to be empty words.
‘The G7’s Deadly Sins’ looks at seven key policy areas where G7 countries’ actions drive a wedge between rich and poor people and between rich and poor countries – including failing to implement progressive tax systems, fuelling climate change, and supporting a shareholder-first business model that drives down the wages and conditions of workers, especially in developing countries.
Oxfam France’s Executive Director, Cécile Duflot, said: “G7 governments have helped to create the inequality crisis, they now have the responsibility to be part of the solutions – to make a choice between a brighter and more sustainable future for all of us or continued extreme wealth for a few.”
To ensure that companies pay their fair share of taxes and to help prevent developing countries missing out on revenue needed for vital public services, G7 leaders should back fundamental reforms being proposed at the OECD, including cracking down on the use of tax havens and introducing an ambitious global minimum effective tax rate.
Despite hosting the world’s largest concentration of wealth and largest number of billionaires, wealth in G7 countries is taxed lightly compared to taxes on consumption and work. Oxfam asked the G7 to consider how new and existing wealth taxes could be used as a tool to fight poverty and inequality. For example, taxing the wealth of the top one per cent of people in G7 countries 0.5 per cent extra could raise more than £200bn a year. That would be enough to provide education to the 262 million children who are out of school and provide healthcare that could prevent the deaths of two million people.
Oxfam is urging Boris Johnson to use his first G7 as Prime Minister to set out how he will deliver on his leadership campaign pledge to fight for those who feel left behind and to bridge the wealth and opportunity gaps between different parts of the UK. Instead of cutting taxes on the richest, he should look at ways to make the tax system more progressive, including how to tax wealth more effectively.
By way of illustration, Oxfam calculated that a new tax on net wealth targeted at the very richest in the UK, based on Spain’s system – starting at 0.2 per cent and rising to a maximum of 2.5 per cent on net wealth of more than £12m – could raise around £10bn a year, which could be invested in supporting the poorest at home and abroad. There is support for fairer wealth taxes from across the political spectrum, including the Archbishop of Canterbury, former Conservative Minister Lord David Willetts and Institute of Fiscal Studies Director Paul Johnson.
Oxfam also warned that the G7 is not doing enough to cut carbon or to help poor countries adapt to the climate emergency, despite historically having been responsible for the largest amount of emissions. G7 countries should cut greenhouse gas emissions drastically now, and to zero well before mid-century, and mobilise the promised $100bn a year by 2020 to support climate action in developing countries.
In addition, the international agency called on leaders to signal the way to a fairer business model where profits and power are better distributed between shareholders and workers, for instance by requiring companies to publish information on their wage inequalities, gender pay gap and CEO to worker wage ratio. It comes as figures published on Monday showed global dividends hit a record quarterly high.
Oxfam urged the six other countries to step up to match the UK and allocate 0.7 per cent of national income to overseas aid – and for all to ensure aid is designed to maximise its impact on inequality and poverty reduction in the poorest countries.
Oxfam spokespeople are available for interview in the UK and in Biarritz, and at the civil society counter summit in Hendaye.
For interviews and more information: please contact Melanie Kramers: firstname.lastname@example.org / +44 7825 088894. For comment and interviews at the G7 summit please contact Laura Rusu in Biarritz: email@example.com / +1 202 459 3739
Notes to editors
Oxfam’s report ‘The G7’s Deadly Sins’ contains references for all figures.
Across the G7, in the last 10 years, revenues from taxing corporations have declined by almost 2 per cent of total tax revenues, while revenues from taxing workers’ income have increased by a similar proportion. The decline in revenues from corporate taxation reflects a long-term trend of cuts in corporate tax rates – the average G7 corporate income tax rate has almost halved from 50 per cent in 1981 to 27 per cent in 2019.
By way of illustration, Oxfam has estimated how much a net wealth tax in the UK could raise by applying the same system used in Spain. This system taxes wealth above a threshold of about £750,000 at a rate starting at 0.2 per cent, rising incrementally to 2.5 per cent for net wealth of around £12m. Under this system, 90 per cent of tax revenues would be raised from the top 1 per cent of households. Pensions and an amount equivalent to the average price of a home would not be taxed. Discounting the possible behavioural impacts of such a tax, which we could not estimate, this system could raise around £10bn of extra revenue a year. A progressive tax of this kind would also have a direct impact on the UK’s Gini coefficient, reducing inequality by around 1 per cent.
The extra revenue could be used to fight poverty at home and overseas. For example, women in poverty across the UK cite a lack of childcare as a major barrier to finding and keeping work. The net cost of providing free universal pre-school childcare in England is just over £6bn a year, according to the Women’s Budget Group. An extra £2bn would mean the UK can keep its promise to provide cash to help the poorest countries adapt to climate change – without diverting money from the aid budget and forcing countries to choose between funding schools, hospitals and climate action.
In his leadership campaign the Prime Minister said: “If we are to unite our country and unite our society, then we must fight now, for those who feel left behind… it should be our fundamental moral purpose as a government to bridge, not just the wealth gap, not just the productivity gap, but the opportunity gap between one part of the UK and another.”
Analysts at the asset manager Janus Henderson collated figures from the 1,200 largest listed companies and found that quarterly dividends hit an all-time high of £423bn.