281. How to tax billionaires

19:55And so with a minimum tax based on wealth equal to 2 % of wealth, we would make sure that they cannot pay less than school teachers, than nurses, and so on. And so that was the idea at the G20. It was to put on the table, on the agenda of the G20, an idea that all countries could support and everybody in our economies could support.

20:17Steph McGovern:It totally makes, you know, it sounds like common sense to do that. But how would you value the wealth? Because if we're saying these are people who cleverly play the system, legally, they do it, where they can, you know, look as if they don't have any income, surely they'll find ways to make their wealth not look as big as it is. And also, how do you value some of their wealth in terms of, you know, if you've got an art collection or if you've got, you know, a tech company where the shares are volatile? So how can you do that? Because as you say, they've got the power. Yeah. So they can play the system on that front.

20:54That's very important. What's really important to understand is that tax avoidance is not a kind of law of nature. It's man-made, right? So we write in the laws, we introduce possibilities for the very rich to avoid taxes. And so if we want to prevent tax avoidance, we just need to write the law differently. We just need to write it very simply and to say, you know, if you're extremely rich, you have more than 100 million pounds in wealth. then no matter what, you have to pay an unavoidable minimum of personal tax equal to 2 % of your wealth, period. If you write the law like that, it's going to be really hard to avoid the tax.

21:40Why? Because the wealth of these individuals is in fact quite simple. More than 90 % of it corresponds to shares in companies. And about half is shares in publicly listed corporations, very easy to value, to observe. And the rest is shares in big private companies, not listed on the stock market. But by definition, because we're talking about very rich people, these are going to be very large private companies. And we know how to value them because there's a whole financial industry that does that. You look at how similar companies that are listed on the stock market are valued by the stock market.

22:22And so then, of course, you're right that they also have yachts and paintings. But first, that's not a big part of their wealth. And second, even for that form of wealth, we know how to value it. You know, if you have a Picasso, and I'm sure that's the case for many of you, it's going to be insured. Yes. So there's an insurance value and you can use it for the Wealth Ducks.

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25:24Robert Peston:just take us through the numbers if it was applied to those with wealth of$100 million dollars plus, or if it was just the billionaires, what are the pots of money that would be raised? Oh, it's a lot of money. Globally, we're talking about$450 billion in tax revenue, so about 0.4 % of world GDP. To give you a sense of how big this is, this is more than all the money that we spend globally on development aid and international, all international agencies combined. But what I want to stress is that it's also a lot of money for the UK because we don't need an international agreement and we should not wait for an international agreement before we start taxing billionaires.

26:14Any country can do it on its own. And if the UK was to do it on its own, it would bring about 15 billion pounds in tax revenue each year. And let me just walk you through the arithmetic and then we can discuss whether it makes sense for one country to do it alone. But in the UK, if you look at the Sunday Times rich list. Yeah, out recently. Out recently, you see that the super rich in the Sunday Times rich list, they own in wealth the equivalent of 25 % of the UK's GDP. That's incredible. It was 5 % in 1989, the first year of the Sunday Times Rich List, and it has increased from 5 % to 25%. Now you tax this 25 % at 2 % and you get, roughly speaking, 0.5 % of GDP in tax revenue, which is£15 billion per year.

27:17Robert Peston:And what do you say to those who always make the sort of alarmist claim that if you were to do this, all of these people would relocate elsewhere and would also stop investing in the UK? Yeah, that's the central question. And so probably the most important thing to understand in all of that, the most important thing to understand is that this tax exile out migration by the very wealthy, it's not a law of nature. It's not like gravity. It is something that we can fight with appropriate policies. So how should we do it? I think the UK should say, look, if you've lived for a long time in the UK and you became really rich in the UK and now you move to another country, then the UK is going to keep taxing you.

28:19Like an exit tax. It's not exactly an exit tax. It's more like a trailing tax. It means that you're going to be considered as still a resident of the UK for tax purposes for a number of years, like five years, 10 years, 15 years, we can discuss. And look, there's one country that does that in some sense, which is the US. The US says if you have US citizenship and you move abroad, you have to keep paying taxes in the US until you die. Maybe that's too much. No, look, you were born in the US. Your parents moved when you were two months old. You never set foot again in the US and you have to pay taxes in the US until you die.

28:59So that's one model. What the UK and other countries do is the opposite extreme. You've lived all your life in the UK. You became a billionaire. Now you move to Dubai and that's it. Immediately on January 1st of next year, you have nothing to pay anymore to the UK. Both of these systems are too extreme. And so what I propose is a kind of middle ground where taxes would follow you for 5, 10, 15 years. And the logic is obvious, right? If you've become a billionaire in the UK, that's in large part because you've benefited from public infrastructure and education and health care and, you know, all the public spending that has allowed your businesses to thrive.

29:40and so there is no natural right once you've become extremely wealthy to secede from society and to say that's it I have no tax to pay anymore anywhere in the world if you move to a country that taxes you as much as the UK then that's fine the UK would not collect anything extra but if you move to a low tax country then the UK should collect the difference so that it would become neutral to live in London or to live in Dubai or to live in Switzerland. Same tax bill in all cases.

30:14Steph McGovern:How is that practically and legally possible, though, to bring in? Because if you did, wouldn't everyone, as soon as it started being talked about, just disappear? And you would, you know, because that's what we've seen every time we talk about what's going to happen in the budget. Before anyone knows anything, people will make decisions based on speculation.

30:31Robert Peston:And there's another point, which is, you know, whether or not this is sensible taxation, and I'm pretty sure everybody listening thinks it's an absolute scandal that, you know, these immensely wealthy people don't pay what would be seen as their fair share. As you pointed out, they have enormous power and enormous influence. If I were the chancellor and I were thinking about doing this, I would also be acutely aware that international investors, you know, regard the UK government's debt as, you know, not quite as secure as they would like. And every time there is an issue, you know, every time somebody raises something about, oh, well, people are going to be moving capital out of the UK.

31:20Robert Peston:At that point, UK government debt prices fall. The interest rate paid by the government goes up. And so you find yourself in a situation where for a whole variety of reasons, even if this feels like the rational thing to do, and even if you've got a chancellor, you know, on the left of politics, they sort of panic and they think, oh, my God, I just can't do this. Yes. The reality is that it's our failure to effectively tax the super rich today, which is at the center of the public finance problems that we have in the UK, but also in France, in many countries. And it's by taxing the super rich that we are going to fix those problems.

32:01Right. This is where the money is. Yeah. So we need to bring in more tax revenues.

32:06Robert Peston:I mean, you became, I think, almost a household name in France because this proposal in, I think it was 2024, at a time of the great sort of chaos around forming a government in France, the left in France said as a price of supporting the government that they should do the Zuckman tax. And then Arnaud, the richest man in France, started a campaign again, and nothing happened. And so if it couldn't happen in France, in your home country, why do you sort of think it might be practical here? It's going to happen because these changes, they never happen in just a matter of weeks. You know, it always takes a bit of time.

32:50And so the discussion has just started. In France, the National Assembly passed this 2 % minimum tax in February of 2025, very recent. And then it was blocked by the Senate. And OK, for now.

33:03Robert Peston:But is it dead or is it going to come back? So it's going to come back. It's going to come back in just a few months, you know, in the next budget discussion. And why is it going to come back? It's frankly, it's obvious. It's because we are not going to be able to solve our public deficit, public debt problems. It could come back as soon as this fall when we're going to discuss the next budget. And if it doesn't pass this fall, then we'll have to wait for the next presidential election of 2027. But look, we're not going to fix our public deficit problems if we don't do that, because it's going to be impossible to ask other parts of the population to make sacrifices, to pay more tax, as long as the billionaires pay so little.

33:38So if you are serious about fixing the deficit, you have to start by asking those who are the wealthiest people in societies and pay the least in tax to pay more.

33:51Steph McGovern:Otherwise, what else can you do? Has anyone left then in France in this time? I'm like, any of the billionaires has even seen any of that. They always, you know, threaten to leave. But they don't actually go. Some of them might be tempted to move, but you have to change the law to say, if you move, that's your right, freedom of movement, go ahead. But it's not going to make a difference to your tax bill. You know, we will keep collecting the minimum tax. But if they get out before the law. The US already does it. So it shows that technically it's passable. and you might need to change the law a little bit to implement this in the UK, but that's okay.

34:26You just need to change the law. And I think for a long time, people had a feeling that it would not be possible to enforce this type of tax because there was a great deal of bank secrecy in Switzerland and tax havens. And so the feeling I think that policymakers had was that, okay, once the billionaires have moved, it's going to be impossible for us to keep track of their income, to keep track of their wealth. But since 2018, there's an automatic exchange of bank information, which is really a game changer, really moving from bank secrecy to bank transparency. And so now the question is, how do we make a productive use of all that information that HMRC receives each year?

35:08Now it becomes possible for HMRC to actually say, OK, look, you live in Switzerland, but you used to live in the UK for a very long time and you become very rich in the UK. Hence, you have to keep paying the minimum tax. And if Switzerland doesn't tax you, we will collect the taxes that Switzerland chooses not to collect. And can I ask you,

35:29Robert Peston:do sort of leading politicians on the left, have they talked to you? I mean, the Greens, I think, would sign up, no question, to your proposal. But have you talked to anybody in Labour about this? Well, what I can say is that in France, that's a proposal that fully unites the left. It also fully unites the right against it, from Macron to the far right. But I think, frankly, that's a big problem for them because in the population, you have enormous support. No, we're talking about 86 % of the population in France, and that's true in all countries, that support this proposal. And so all the left parties are saying, of course, we should do that.

36:13Many think, and I would agree with them, that we need to do more than 2%, but it's so minimalistic that how can you be against? Can I just ask you on that?

36:21Robert Peston:Because you would argue that it would have pretty broad support. So what would Le Pen or Bardella say about this? No, they think that it's impossible to tax the super rich, that we have to accept that they're untouchable. Right. Even though a lot of their supporters would presumably be in favor of them. Yes. Everybody in the population almost is in favor, except the billionaires. But so you always have in the population, you always have perhaps 10, 15 percent of the population who believes that the law should be more lenient for the very rich, for the powerful and harsher on the poor, on immigrants.

37:02But it's always a tiny fraction of the population. Most of the population wants equality before the law. And the current situation is a violation of this basic principle, which is at the heart of our democracy, of equality before the law.

37:19Steph McGovern:So if you take where things are politically for us at the moment and the growth of reform, and that is driven a lot by working class people who are annoyed at the fact that their lives haven't got any better. And as you say, there's this inequality of wealth. But yet the leader of reform's taking money from billionaires. But he's probably going to present all this in a way that makes people think it's not possible or we shouldn't be doing it. And because a lot of public figures, politicians, are getting money, are getting donations from very rich people. And that comes back to your point about the rich people have got the power to persuade the politicians.

37:58Yeah, no, but that's why I try to spend so much time trying to explain how we can make it work practically. Because I think at the level of general principles, as you said, we all agree. And the debate is always about, OK, but if we really did it, wouldn't we be shooting ourselves in the foot. And so to make it work, the way I've approached this issue is that I've studied historical and international experience with wealth taxation. Many countries in Europe used to have a wealth tax. And the conclusion I reached with my colleagues is that those wealth tax, they really didn't work very well. And by and large, this experiment has been a failure.

38:39But you can look at that and you can say, well, we've tried wealth taxes in the past and they didn't work, hence they will never work. Or you can look at this and you can say, okay, what were the problems? Do they have solutions and can we fix them? And the truth, the reality is that yes, there were problems, but we know the solutions. They exist. There were two problems. One in those past wealth taxes, the billionaires were essentially legally exempt because you always had deductions, exemptions for, you know, if you owned a lot of shares in the companies, all that wealth was typically exempted from the French wealth tax, from the Spanish wealth tax, and so on.

39:17So of course, the solution is don't write the law like that. And hence my idea of starting really high in the wealth distribution. It's only people who have more than 100 million pounds in wealth who would be affected. But in exchange for that, no exemption, no deduction whatsoever. Okay. And so that's key to make the tax work. And then the second issue was that the countries that had wealth taxes, they never did anything to fight the risk of out-migration. And the solution is create this kind of anti-exile shield, this new principle that, you know, you became rich here, now you move, it's not going to make a difference.

39:58You will still have to pay the 2%.

39:59Robert Peston:And I think you said that if we did this in the UK, it would raise roughly 15 billion pounds. Yeah. Now, 15 billion pounds, it's a lot of money, right? But it is less than a tenth, for example, of what we spend on our health service, right? It's useful, but it's not going to transform the public finances. And would you see this as a sort of first step on a path to rebalancing how we do taxation? Because if you look at an economy like the UK, it seems patently obvious that we tax work too much and we tax assets too little. Well, first of all, 15 billion pounds, it's a lot of money. I'm not saying it's trivial, but it's not transformative.

40:48I mean, just to give a sense of how much money we're talking about, Keir Starmer famously wanted to get a bit of money by cutting winter fuel allowance for retirees. And that was, he was expecting 1.5 billion pounds from that. Okay, so here we're talking about 10 times more money coming from about 1 ,000 people. That's roughly the number of people who have more than 100 million pounds in the UK. So, number one. Number two, you're absolutely right that it's not going to fix all the problems. But it is indeed a first step. Because once governments have demonstrated that no one is above the law, that the super-rich can be made to pay their fair share, then it opens a realm of possibilities.

41:34Steph McGovern:Yeah. Just following on from what Robert asked you then earlier, which you cleverly avoided. Have you spoken to any of our lot then? You know, particularly any potential neighbour leaders, Andy Burnham.

41:44Robert Peston:We've got this, you know, we've got this possibility that the prime minister is going to be replaced. There is a pretty high chance that it may be Andy Burnham, the mayor of Manchester. Have you met Andy Burnham? No, I've not met him. But I'd be very happy. I've met many people interested in those issues in many countries. I've worked with a long time, for a long time in the US with Bernie Sanders, for instance, when he was running for president in 2019, working on his economic program, his tax program. I've worked with many people in France. And after the process that started at the G20, when Brazil that had the presidency of the G20 in 2024 put this issue on the agenda of the G20, it has created an international movement because it has forced the different countries to kind of explore this new idea.

42:31And so now you have, of course, you had what happened in France, But then you had bills in parliament that are being introduced in different countries, whether it's Belgium, whether it's the Netherlands, perhaps Spain soon. And so I think we're at the beginning of an international movement to finally tax the ultra wealthy. A bit like what happened at the beginning of 20th century when we created the income tax, the progressive income tax. And the UK was a leader. You know, the people's budget of 1909 is the creation of progressive income tax. You create the super tax of 2.5 % on income for the 10 ,000 wealthiest people in the UK.

43:10And then, you know, France did its progressive income tax in 1914, the US in 1913. So the UK could, again, you know, be a leader. It could be a leader. A leader.

43:19Steph McGovern:Do it. So just, I guess, in conclusion, thanks. We'll wrap things up. What's the one thing that needs to happen to change? Like, what do you think is the biggest thing holding this back? Like, what can we do to make this happen? Well, I think it's overcoming this false notion that as individual nations, we are powerless. Yeah. We are not powerless, right? Okay, if we keep the current rules as they are, if we tolerate or even foster international tax competition, then, okay, yes, it's difficult. But we can change the rules. All of those rules, they are man-made. So that's the key intellectual obstacle.

44:01Taking the risk, isn't it?

44:02Steph McGovern:I think.

44:02Robert Peston:They're all social constructs. That's the point. Excellent.

44:05Steph McGovern:Gabriel, this has been fascinating. The time has flown, hasn't it? Thank you so much. Absolutely gripping conversation. And I should say as well, you've got your book as well. We Need to Tax Billionaires. So it is definitely worth a read. But thank you very much, Gabriel. Lovely to see you. That's it from us on The Rest is Money. Bye bye.

44:21Robert Peston:And it's goodbye from me.

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