Recently, I had collected some information about the majority of parliamentarians of the US Republican Party who had “rejected any tax increases,” and during a televised debate among US presidential candidates of the Republican Party, all eight participants said “they would reject any tax increase.” Such statements were made while facing the tremendous public debt of the USA, and the need to rectify this situation over the coming years.
This attitude is in stark contrast not only to high level considerations in some other countries, but also a number of very rich individuals in several countries have stated publicly that they consider present taxation systems providing privileges to the very rich not to be just and appropriate. To quote some examples:
Italy’s austerity package will increase the value-added tax rate by one percentage point to 21 percent and apply a 3 percent levy on incomes of more than €500,000 [approx. US$680,000] a year.
Japan’s new finance minister, Azumi Jun [安住 淳]…, suggested the government might need to raise the [corporate] tax among others provisionally in order to secure funds for reconstruction work following the earthquake and tsunami that struck in March.
The Prime Minister of France, François Fillon, announced a ‘rigor package’ to cut the country’s deficit, which includes an “exceptional contribution” of 3% on taxable earnings for those earning above €500,000 [approx. US$680,000], higher taxes on tobacco and alcohol, and a modification of capital gains tax on property.
The Chancellor of the United Kingdeom [= minister of finance], George Osborne, is under pressure after a group of economists called for Britain’s 50 percent top rate of income tax to be scrapped “at the earliest opportunity…” Osborne made it clear on Tuesday night that the coalition government had no intention of rethinking its tax and spending plans. – According to 2010 data, the UK had, together with Austria and Belgium, the fourth highest tax rate in Europe for those earning more than £150,000 [now approx. US$238,000], while Sweden, Denmark, and the Netherlands had top tax rates of 57%, 55%, and 52%.
One argument, regularly used by movements and efforts to decrease high tax rates, is the claim that high taxation is hindering economic development. But it is interesting to look, in this context, to the three countries in Europe that have top tax rates of over 50 percent: these three countries, not among the biggest ones, with populations of 16,8 million (Netherlands), 9,1 million (Sweden), and 5,5 million (Denmark) [Cambodia’s population is estimated at present to be between 14 and 15 million], are, together with Luxembourg and Norway, the five countries in the world with provide more than 0.7 % of their own Gross National Product as international Official Development Assistance. (The figure of 0.7 had been proposed in 1969 as a target figure by the World Bank Pearson Commission “Partners in Development” for rich nations to give, to achieve sustainable economic development in the Third World.) In spite of their high tax rates, these three countries [plus two more small countries: Luxembourg and Norway]) are among the five countries world wide that achieve more than the 0.7 % target.
It is not surprising that an Internet opinion poll by The Guardian comes to the following results [on 11.9.2011], having asked if the UK government should abolish the 50% tax rate, as a group of twenty high-profile business experts had proposed in a public letter, expressing concern that Britain’s top rate of tax is doing “lasting damage to the UK economy.”
Should George Osborne abolish the 50 percent tax rate?
74% – No, the better off have to give more
26% – Yes, the higher rate damages the UK economy
While this general public opinion is not surprising, what is surprising is that a number of extremely rich people have recently also criticized the taxation systems of their countries:
Warren E. Buffett [75, USA], one of the world’s wealthiest men, plans to donate the bulk of his $44 billion fortune to the Bill & Melinda Gates Foundation and four other philanthropies starting in July… Mr. Buffett plans to give away 85 percent of his fortune, or about $37.4 billion… Of that amount, he will channel the greatest share, about $31 billion, into the Gates Foundation – probably the largest sum of money donated to a foundation.
Other amounts given to other foundations are to support family planning, abortion rights and anti-nuclear proliferation issues; environmental and conservation issues; educational opportunities for low-income children; and education and human rights.
Warren Buffett explained his motive in an open letter that was published also in The New York Times:
Stop Coddling the Super-Rich
Our leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot…
…People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation…
In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent…
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances… I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.
My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.
Some weeks later, another US millionaire continued with a similar announcement. Rick Steves, the founder of a huge travel company and a TV show, is donating US$ 1 million to a local arts center to help the community and to make a political statement, donating US$100,000 per year over the next 10 years.
“Over the last decade, my tax burden has decreased even as public funding for important local programs and institutions has been decimated – a trend I find alarming,” he said in a written statement. He’s asking other rich people to make similar donations. “I see it as a civic duty for businessmen like me, who’s directly benefited from our vibrant communities to do our fair share…” and to “speak out on the wisdom of rolling back the tax cuts for our wealthy.”
At the end of August, four German millionaires joined this international movement: those who make a lot of money should also share more. A pop-star, the owner of a mail-order company, the president of a soccer club, and an entrepreneur in the insurance business declared that they would be prepared to pay more taxes, provided it is assured that such funds would be used to improve society and to reduce the public debt. “To add some more percent to the tax rate for the rich will not make them poor.” – “The tax on inheritance transfers of property should be markedly higher! That does not mean a family that saved a long time to own a home should have to pay a lot when the property is inherited by their children. But those who own millions of property should have to pay much more!”
Sixteen of the wealthiest French citizens had made a similar declaration:
As a group of France’s wealthiest citizens, including L’Oréal heiress Liliane Bettencourt, take up the call for a tax on the rich, François Fillon, the French prime minister, announced on Wednesday a “rigor package” to cut the country’s deficit and save €11 billion (approx. US$15 billion).
The 16 French business executives and wealthy individuals, including Liliane Bettencourt, the richest woman of France, the heiress of the cosmetics company L’Oréal; Pierre Bergé, co-founder of the fashion house Yves Saint Laurent; Christophe de Margerie, of the oil group Total; Frédéric Oudea, head of France’s second biggest bank Société Générale; and Jean-Cyril Spinetta, president of Air France-KLM, signed a petition calling for an “exceptional contribution” by the country’s richest citizens as a measure to help France drag itself out of the economic crisis that has hit the eurozone countries.
In the letter to Le Nouvel Observateur, the 16 signatories said:
“We, presidents or company leaders, businessmen and women, bankers, professionals and wealthy citizens, would like an ‘exceptional contribution’ imposed on the most fortunate French taxpayers.
“We are aware that we have fully benefited from the French model and European environment to which we are attached and that we want to help preserve them. This contribution is not a solution in itself: it should be part of a more global effort of reforms affecting [public] spending as well as [tax] revenues.
“At a time when the public finances deficit and the prospect of a worsening state debt threaten the future of France and Europe, and when the government is asking everyone to show their solidarity, it seems necessary for us to contribute to this.”
Luca di Montezemolo, the former board chairperson of the Fiat car company, now chairing the sports car company Ferrari, also called in Italy for higher taxes for the rich. His solution for the debt crisis in Italy is simple and straightforward: Tax the rich, since asking the already-squeezed middle class to pay more would be “scandalous.” It is estimated that he owns US$400 million.
Is all this interesting in Cambodia? There are no widely known initiatives in Cambodia calling – by the rich to the rich – to share a heavier burden of the resources the government needs to fulfill its public tasks of maintaining public services of health care, education, and housing.
But in 2005, the following had been reported by The Cambodia Daily [6 June 2005]:
Several prominent Cambodian businessmen say they would donate money to help cover the government’s $11.8-million shortfall for the Khmer Rouge tribunal if the government makes an official request. “I will donate money [to the tribunal] in order to help the government,” said Sok Kong, director of the Sokimex Company. He adds that he didn’t believe he would be the only business leader prepared to pitch in. Kith Meng, chairman of the Royal Group of Companies, echoed the statement, “If [Hun Sen] comes up with a policy or a formal request, we would have no objection.”
But on 9 June 2005 The Cambodia Daily reported that the Prime Minister had rejected such fund raising for the Khmer Rouge Trial:
Prime Minister Rejects Fund Raising For Khmer Rouge Trial
Commenting on a proposal to raise money for the Khmer Rouge tribunal from local Cambodian contributions, Hun Sen said: “I think such a proposal is not acceptable. Cambodian people earn money just to live,” Hun Sen told reporters following a graduation ceremony for Buddhist monks at Chaktomuk theater.
Om Yentieng, a member of the government’s Khmer Rouge task force, said later in the day that there would be no appeal to the country’s wealthy business leaders or anyone else for help. “We won’t do fund raising with our people or businesses,” said Om Yentieng, who is also an adviser to Hun Sen. “Our country has appealed to donors to help on this matter.”
A report in the Phnom Penh Post in August 2011 about a newly introduced property tax on residential property, which will be collected only from house owners whose house is worth more than US$25,000, was more concerned that such new tax might lead to less business activities of selling and buying houses:
The property tax will initially focus on the capital’s properties, comprising an annual payment calculated at 0.1 percent of the value of the property.
The taxation will also put pressure on multiple-property owners, especially residential landlords, who may reconsider purchasing further properties, potentially reducing transactions, the general manager of a property company was quoted, suggesting that the implementation of the new legislation should be postponed for a year.
Another property broker was quoted with the following surprising statement:
“If the taxes are used to develop the country, citizens should abide, however, many people are unlikely to pay, due to poverty.”
In several of the economically higher developed countries, there is, as described above, a new public discussion about the responsibility that comes with wealth. This notion is clearly embedded – for example – also in Article 14 of the Constitution of the Federal Republic of Germany:
Property entails obligations. Its use has to serve also the public good.
Article 44 of the Constitution of the Kingdom of Cambodia provides the framework for the protection of ownership – including the requirement for fair and just compensation in advance, when ownership is withdrawn in the public interest (often contested by those who lose the possibility to continue the use the house and land where they used to live for years):
All persons, individually or collectively, shall have the right to ownership. Only Khmer legal entities and citizens of Khmer nationality shall have the right to own land.
Legal private ownership shall be protected by law.
The right to confiscate properties from any person shall be exercised only in the public interest as provided for under the law and shall require fair and just compensation in advance.
In the absence of legal regulations requiring the owners of properties to use them also for the public good, special concern is needed to avoid an increasing wealth accumulation under the control of few, while the many are left with scarce resources. The announcement in June 2011 that China has 960,000 millionaires with a personal wealth each of US$1.5 million or more – while a large part of the Chinese population is living under harsh economic conditions, putting social stability and peace at risk – shows that not only macro-economic success, but distributive justice is a challenge that has to be dealt with, so that gains in one respect will not be lost because of ever increasing inequality and injustice.