Mass participation in the agreement could generate up to $250bn a year to combat hunger and the effects of climate change

07/02/2024

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Mauricio Lyrio — Foto: Wenderson Araujo/Valor

The success of implementing a wealth tax, a proposal spearheaded by Brazil during its G20 presidency this year, hinges on global adoption, according to Ambassador Maurício Lyrio, secretary of Economic and Financial Affairs at the Ministry of Foreign Affairs and Brazil’s G20 Sherpa, the personal envoy leading negotiations. Speaking on Monday at the Science 20 (S20) discussions in Rio, Mr. Lyrio also addressed energy transition, climate change, debt swaps, and combating hunger.

Mr. Lyrio emphasized that the government aims to continue the debate initiated in 2021 when the G20, in a binding agreement with the Organization for Economic Cooperation and Development (OECD), developed the “Two-Pillar Solution” to better direct the taxation of multinational corporations across their various markets.

Pillar 1 ensures that part of the profits of multinationals remain in the market jurisdictions where the profits are generated, while Pillar 2 establishes a 15% minimum tax on their global operations. Finance Minister Fernando Haddad, leading the G20 Financial Track, commissioned a study by French economist and University of California Professor Gabriel Zucman. The study proposes a 2% tax on large fortunes. According to the study, there are about 2,000 to 3,000 ultra-wealthy individuals worldwide, and a global agreement among all countries could generate $200 billion to $250 billion annually.

“It’s crucial to ensure effective international coordination. A global taxation effort won’t be effective if not universally accepted. We must work collectively to prevent tax evasion by defining headquarters,” said Mr. Lyrio. “It’s not simple, but Minister Haddad has managed to bring the issue to various governments, and there’s already a lot of positive reaction.” He noted that there is no consensus yet on how the revenue would be allocated.

Mr. Lyrio also mentioned that the G20 Summit will coincide with the COP29 in Baku, Azerbaijan, leading to potential cross-influence between the summits. He believes that achieving the goals of the Paris Agreement and future agreements requires multilateral negotiation. Mr. Lyrio pointed out that the G20 comprises diverse countries, with some rich in fossil fuels and others, like Brazil, in renewable resources. He argued that Brazil is one of the few countries where new oil and gas exploration frontiers like the Equatorial Margin are unlikely to cause a substantial impact.

“Brazil is a unique case; we completed the energy transition before the environmental crisis. About 93% of Brazil’s electricity is renewable, mostly hydropower, along with solar and wind,” he said. “Exploring more oil doesn’t change this mix; our emissions [from power generation] are already much lower than other countries.”

As Brazil’s main initiative in the G20, Mr. Lyrio highlighted the “Global Alliance Against Hunger,” which has three pillars: the Autonomous Pillar, where participating countries choose a social program to implement from a range of options; the Financial Pillar, which discusses the possibility of debt swaps for poor and indebted countries implementing social programs; and the Knowledge and Cooperation Pillar.

On July 4, Mr. Lyrio will receive proposals from the 13 engagement groups forming the social axis of the economic forum at the G20 Sherpas’ track meeting. For the first time, these contributions will be delivered in time to be incorporated into the declaration to be submitted to member states, which will be reviewed at the Leaders’ Summit in November in Rio.

Before that, a forum will gather all representatives from the engagement groups. “Previously, it was an informal relationship, now we’ve institutionalized it. This isn’t a pro-forma contribution, not something received at the last minute when the declaration is already negotiated. We want a real contribution.”

*Por Victoria Netto — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/