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Is It Time to Impose a “COVID-19 Tax” on Billionaires?

Former Managing Director of Ahmedabad Stock Exchange
Dec 19, 2020 12:09 PM 4 min read
Editorial

The total wealth of the world’s 2,189 billionaires has soared to a record high of $10.2trn on the coat-tails of the coronavirus pandemic. According to a report by the Swiss bank UBS,, the wealth of the world’s billionaires increased by 27.5% between April and July this year, the period when the pandemic was at its peak. Their wealth, by the end of July, had touched a record high of $10.2trn. The previous peak of billionaires’ wealth was $8.9trn at the end of 2017. Since then, while the number of billionaires has increased slightly from 2158 to 2189, their wealth has increased considerably.

Many countries are undergoing a "K-shaped recovery," with working-class people going deeper into debt while those at the top prosper. This uneven recovery is amplifying economic disparities that existed pre-pandemic and is widening the gap between the haves and have-nots.

Two-thirds of the total wealth in the USA is owned by the richest 5%. But 38.1 million people were living in poverty in the USA in 2018. More than 29 million people are presently collecting unemployment benefits. However, at the top end of the economic ladder, during the first three months of the pandemic, the net worth of 600 billionaires in the US grew by 20%.

The wealth of Indian billionaires has increased by 35% between April and July this year to $423bn. Over this period, output has contracted by almost a quarter, and so has employment. This contrast gives an idea of the modus operandi of crony capitalism.

A January 2020 study by the rights group Oxfam India suggests that India's richest 1% hold more than four times the wealth held by 953 million people who make up the bottom 70% of the country's population. The study added that the top 10% of India's population holds over 74% of the total national wealth.

"Our broken economies are lining the pockets of billionaires and big business at the expense of ordinary men and women. No wonder people are starting to question whether billionaires should even exist," Oxfam India CEO Amitabh Behar had said.

Since the study of Oxfam India was during January 2020, it does not capture the economic devastation caused by the coronavirus pandemic. The International Labour Organisation (ILO) report - which predicts that 40 crore Indians could be pushed into poverty - offers a better picture of the widening wealth gap in India during the pandemic. Ever since India went under a strict lockdown on March 25th, millions of the country's poorest workers were immediately rendered jobless and left without any income source. Even the country's vast middle-class population encountered a sharp loss of income during the pandemic due to a wave of job losses and pay cuts.

On the contrary, the story of India's billionaires during the pandemic has been starkly different. Some of the Indian billionaires such as Radhakishan Damani, Cyrus Poonawalla and Mukesh Ambani have gotten richer during the pandemic. Ambani, who is the sixth richest man in the world, has added $30.5bn to his wealth this year. Vaccine king Cyrus Poonawala, the CEO of Serum Institute of India, saw his wealth grow sharply this year as well. He is currently at the 123rd position on the Bloomberg Billionaires Index with a net worth of $14.3bn. Of Poonawala's total net worth, $5.56 billion was added this year.

According to several studies, a rising income gap leads to lower per capita GDP growth.

"This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate," said OECD Secretary-General Angel Gurría. "Countries that promote equal opportunity for all from an early age are those that will grow and prosper."

"The pandemic illustrates, you know, I think, the need to change the economic system and to get in the direction of the more equal and more equitable and more sustainable model of economic development," French economist Thomas Piketty said.

The idea of a “Covid-19 Tax” has gained traction, with a handful of the world’s ultra-rich themselves calling on governments to permanently increase taxes on wealthy people to help fund the economic recovery. Such taxes are nothing new, explains Luke Holland, of the Paris-based think tank the Tax Justice Network. They can either be levied by taxing a wealthy person on their assets or their excess profits during a crisis. “Radical wealth taxes have been used all over the world for a very, very long time,” Holland told a website. “Many companies made an absolute fortune out of World War II … governments were imposing taxes of up to 90% on their excess profits.”

With the events of 2020 further stretching the wealth gap, an appetite is growing in many countries for a tax on the ultra-rich that can help governments tackle the crisis and rebuild nations.

FIN.

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