Applying the “Zucman tax,” a levy on large fortunes, in seven Latin American countries would make it possible to raise $24 billion a year by taxing only about 3,000 people, according to a study published Tuesday. The report on a minimum tax for high-net-worth individuals in Latin America proposes a way to tax extreme wealth, but it also faces resistance in the world’s second most unequal region.
“Inequality in Latin America will not correct itself: we need a minimum tax on large fortunes,” said Vicente Silva, author of the study. The report analyzes the tax systems of Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Uruguay. The study proposes implementing a 2% tax on fortunes above $100 million, which would generate $24 billion a year across those seven countries.
“It is not a matter of political ideology,” Silva said. He is a senior adviser at the International Fiscal Observatory and noted that governments across the region all face the challenge of meeting social demands amid tight public finances and a rising cost of living.
The Richest 1% Pay Less
The lawyer and inequality expert said that during the research, they found that “the richest 1% pay proportionally less in taxes than the poorest 50%.” This tax would affect only about 3,000 people out of a total population of 500 million in the seven countries studied.
A more ambitious scenario suggests that applying a 3% rate would raise $36 billion a year, according to the study commissioned by Brazil. “Our proposal would also help correct the regressivity at the top, ensuring that the super-rich contribute according to their economic capacity and pay at least as much as the rest of society,” Silva explained.
The expert noted that “the super-rich in countries such as Brazil and Chile pay effective rates that are almost half the population average, in a context where the wealth of fortunes above $1 billion has multiplied sixfold over the last 25 years.” Brazil championed the idea of taxing large fortunes in 2024 while holding the G20 presidency, and commissioned a report from French economist Gabriel Zucman, who is widely known as one of the main advocates of the proposal now referred to as the “Zucman tax.”
The idea presented to the G20 was to create a 2% tax on fortunes above $1 billion worldwide, with the potential to raise between $200 billion and $250 billion a year. Despite resistance, at the summit held in Rio de Janeiro that year, the group of the world’s 20 richest economies pledged to work “cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.”
“In a region with so much inequality, effectively taxing the largest fortunes means applying a minimum wealth tax that ensures the super-rich pay at least the same as the rest of the population,” Zucman, director of the International Fiscal Observatory, told AFP.
Entrenched Narratives
“Today, large fortunes are earning annual returns of about 8% on their wealth. A minimum tax of this kind at 2%, with those levels of return, basically barely touches their portfolio. That return would decline only very slightly,” he said. For Silva, there is technical capacity to implement this tax, but what is lacking is “political will” to confront “deep polarization” and elites that oppose it.
“It is not easy to push back against entrenched narratives,” he said, citing as an example the belief that lowering taxes on the rich boosts growth. He rejected that idea by referring to a London School of Economics study that found no evidence over the last 50 years that tax cuts for top earners drive economic activity.
Silva was emphatic in saying this would not trigger a massive fiscal exodus. “The evidence shows that people are not going to leave. People have their networks in the country, they have their businesses in the country, and they have an economic position there,” he argued.
“If someone were to decide to move their tax residence because of the tax, our proposal includes exit mechanisms to reduce the risk of that happening. In the end, tax competition is a political decision, and we have tools to confront it,” Silva explained.
