PARIS — France’s Emmanuel Macron never liked his nickname “president of the rich.” Seven years after he took office he might have finally found a way to try to shake it off.
He is teaming up with Brazil’s left-wing firebrand leader Luiz Inácio Lula da Silva to push for a global minimum tax rate for the world’s wealthiest people. A draft proposal is due to be circulated to governments soon, according to officials who spoke to POLITICO.
We’ve known about Macron’s bromance with Lula for some time. In March, the pair went on a boat trip to an Amazonian island where they scampered through the rainforest, held hands and wore matching outfits. It was on the last day of that visit that Macron confirmed his support for the plan — something Brazil is banging the drum for while holding the rotating chair of the G20 group of countries.
But the whole thing comes as a surprise because cutting rather than increasing taxes for the wealthiest had been a trademark of Macron’s government since day one. And his conservative finance minister, Bruno Le Maire, takes pride in rejecting any notion of new levies despite France’s debt troubles. What’s more, Le Maire immediately signaled unease when, at the start of 2023, government advisers suggested France take a position in favor of a global minimum tax rate on people, according to officials familiar with the issue.
It’s not unduly cynical to think that, with pressure from populist and left-wing forces at home, Macron and Le Maire want the kudos for pursuing the idea – while recognizing there’s a high chance it’s never going to happen.
How Le Maire changed his mind
“Is it also opportunism and politics? Yes,” Pascal Saint-Amans, a Frenchman who for a decade led a global corporate taxation overhaul at the OECD, the economic intergovernmental body, said. “There was a political decision that took some time to come. There was an internal debate within the French administration on this issue. In the end, they decided to support this work.”
Brazil was trying to address an inequality issue “that is on everyone’s mind and also feeds populism,” Saint-Amans said.
POLITICO has obtained insight into the internal back-and-forth which has led to Macron and Le Maire embracing the plan. After months of behind-closed-doors discussions with top officials and economists, Le Maire ultimately warmed to the idea, according to two people with direct knowledge of discussions, who spoke to POLITICO on condition of anonymity because the topic is so delicate.
Then, after deciding to go for it, the French government went all in, sensing that the initiative was an opportunity not only to show itself as one of Lula’s biggest friends on the world stage, but also as on the side of the workers at a time when Macron is feeling the heat from Marine Le Pen’s far-right National Rally party.
Le Maire was among the first to publicly endorse the plan put forward by Brazil at a meeting of G20 finance ministers in Sao Paulo in February. Ministers will talk about it again in Rio de Janeiro in July.
“I prefer this debate on international taxation to the interminable debate in France on our own tax system,” Le Maire told reporters in April.
‘Nothing has been ruled out’
For France’s opposition parties, which broadly speaking are less pro-business than Macron, there’s now disquiet that the government’s backing for the super-rich tax gives it the opportunity to claim it is taking action to tackle inequality, when the chances that every government at the G20 — from Beijing to Istanbul and Washington to Riyadh — is going to agree on genuine reform is a long shot, at best.
“It cannot be an invitation to do nothing at the national level while waiting for all countries in the world to find an agreement,” left-wing French lawmaker Eric Coquerel, who chairs the National Assembly’s finance committee, said. “Unfortunately it is evident that Bruno Le Maire is using that argument.”
It is, after all, not the first time that Macron’s government has used global tax reform as a way to dodge a tax controversy at home.
In any case, there’s some evidence the government is being more cautious about the plan in private. While Le Maire publicly referred to the plan as modeled on the one agreed at the OECD for companies, which includes a minimum tax rate, a French Economy Ministry official said it didn’t necessarily have to be like that. For now, “nothing has been agreed, nothing has been ruled out,” the official said.
The politics may be smart. Macron has little to fear from endorsing a proposal that would only see the light of day years from now, said Tommaso Faccio, head of secretariat at the Independent Commission for the Reform of International Corporate Taxation (ICRICT).
“If you touch the interests of the elites, you don’t risk street riots like those of the yellow vests,” he said, referring to the violent protests against Macron’s plans for higher taxes on fuel ― crucially affecting everyone, not just billionaires ― that erupted in 2018. “Le Maire probably also supports this proposal as a distraction tool at the national level,” he added.
Then there’s the chance to stick one to the Americans, which also always goes down well in France.
Le Maire himself, in fact, has already fought with the U.S. on subjects ranging from corporate taxation to green subsidies and gas exports.
U.S. Treasury Secretary Janet Yellen publicly rejected the tax on billionaires, which Macron said was “a pity,” noting that “even in the U.S. society, more and more people now are a little bit shocked or upset by the level of wealth accumulated in some hands.”
The government of Germany, also a member of the G20, is split on the issue, with Finance Minister Christian Lindner rejecting the proposal.
What’s the plan?
The EU Tax Observatory, which advises the G20 Brazilian presidency, has proposed to impose a minimum 2 percent levy on the world’s 3,000 richest billionaires. The measure, which the Tax Observatory will present on Tuesday, could unlock approximately $250 billion that Brazil would like to use to tackle poverty and climate issues world-wide, not to replenish national budgets.
If it happened the impact would be felt in France. The world’s richest man, France’s Bernard Arnault, would have to pay roughly $4.2 billion of additional tax per year, according to estimates by the EU Tax Observatory.
The current stall on the global reform of corporate taxation is showing how hard it is for countries all over the world to tweak their tax systems. And a tax on billionaires is likely to prove even harder.
“It is a lot more complex when it comes to taxing individuals,” Saint-Amans said. “It does not mean that it is impossible.”
Paul de Villepin contributed reporting.