Mon, Jan 28, 2019 - Page 6 News List

EDITORIAL: Curtailing inequality with tax reform

Political and business leaders gathering for the annual World Economic Forum in Davos, Switzerland, last week were preoccupied with the slowing global economy, ongoing trade tensions and business uncertainty. Those descending on the Swiss ski resort had seen the IMF’s revised forecast for global growth this year corrected downward to 3.5 percent from a forecast of 3.7 percent in October.

“The risk of a sharper decline in global growth has certainly increased,” IMF managing director Christine Lagarde told the global elite on Monday, as they wondered how much it might continue to weaken.

Concern about slowing global growth surfaced throughout forum discussions on key political and economic issues, ranging from China’s slowing economy and the US-China trade spat to the possibility of a no-deal Brexit, media reports during the week said.

However, people were most shocked by a report released by the Nairobi-headquartered charity Oxfam on Monday last week, which said that wealth inequality around the world is “out of control,” and that the wealth gap has fueled popular anger and threatened democracies.

According to Oxfam, the world’s 26 richest people possess the same amount of wealth as the poorest half of the world’s population. The charity’s report indicated that billionaires worldwide saw their combined fortunes grow by US$2.5 billion each day last year, an annual increase of 12 percent, while the poorest half saw their wealth decline by 11 percent from a year earlier.

While business leaders and the wealthy elite in Davos discussed their efforts to fight poverty and climate change, the Oxfam report showed that some rich people are pocketing wealth without paying their fair share, as tax rates for the rich and corporations have been cut over the past few decades.

At the same time, tax systems have put a high burden on the poor and governments have exacerbated inequality by providing insufficient funding for public services, the report said.

Widening inequality is destructive in countries confronting low economic growth or long-term wage stagnation. For instance, France’s “yellow vest” protesters, who first took to the streets in opposition to a planned fuel tax increase, have demonstrated for 11 consecutive Saturdays to vent their anger over inequality and the high cost of living, as well as their distrust of the government.

Dissatisfaction over increasing wealth inequality and widespread frustration over governments’ failure to present solutions have led to populist electoral victories and trade protectionism around the world in the past few years.

To resolve the inequality problem, Oxfam said that countries should slap more taxes on the wealthy, while governments should work harder to deal with tax dodging and use the revenue to improve public services such as healthcare and education, which are inevitably needed by poor people.

In Taiwan, imposing a wealth tax on the very richest people to help combat inequality has been discussed in the past, but no proposal has ever been implemented due to political, legal and practical obstacles, such as deciding how taxable wealth should be defined and who a wealth tax should target.

Still, the charity’s suggestions could be a good fit for Taiwan. The nation faces widening income inequality. Tax reform to help narrow the gap between the rich and the poor can never come too late.

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