When even the super-rich are embarrassed by their wealth, it’s time to make them pay more tax

During a pandemic that has pushed 160 million people into poverty, billionaires doubled their wealth and luxury goods sales have surged as the rich seek to ‘live now’
With millionaires themselves calling for a tax revamp that could raise 2.3 billion out of poverty, why isn’t it being done?

David Dodwell

Published: 10:00am, 24 Jan 2022

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Who could have imagined that a tragic pandemic, which has killed almost 6 million people and sickened 340 million, pushed more than 160 million into acute poverty and stripped trillions of dollars from the global economy, could have coincided with unparalleled prosperity for the world’s super-rich?

Last week’s Oxfam report “Inequality Kills” outlined some shocking numbers: the world’s 10 richest men (yes, they are all men) have since March 2020 added around US$800 billion to their aggregate wealth, lifting it to US$1.5 trillion.

Oxfam calculates that a 99 per cent one-off tax on that 20-month windfall would have paid for vaccinating the entire world and funding universal health care globally – and still left these men US$8 billion better off than when the pandemic began.

It estimates that the world’s 2,755 billionaires – up by 660 from 2020 – saw their combined wealth rise by US$5 trillion in the same period, “while poverty is contributing to the death of 21,000 people per day”, and while women’s earnings worldwide fell by US$800 billion. However you tweak these numbers, they paint a breathtaking picture of gross inequality. And these ballpark judgments are confirmed in many luxurious directions.

Take Torsten Muller-Otvos, the boss of Rolls-Royce cars, who on January 10 reported 2021 was the best year of sales in the company’s 117-year history – up 49 per cent to 5,586 vehicles. Still, it was not so much the numbers as Muller-Otvos’ explanation that was astonishing: “Quite a lot of people witnessed people in their community dying from Covid. That makes them think life can be short, and you’d better live now.”

Other luxury carmakers reported a similar “live now” boom. At Mercedes, Maybach sales jumped 50.7 per cent, while at BMW, Bentley sales were up 31 per cent.

Muller-Otvos was not alone in his ghoulish humour as millions suffered worldwide because they could neither access nor afford vaccines; France’s Comite Champagne is celebrating a 32 per cent jump in global champagne sales, to 322 million bottles.

“Clients have decided to treat themselves at home, and create new moments for conviviality and sharing, despite the morose atmosphere,” they reported. No doubt Boris Johnson and his Downing Street colleagues made their own distinct contribution to those “moments for conviviality and sharing”.

The Superyacht Group reported over 200 newly launched superyachts (longer than 30 metres) in 2021. Among them was the US$278 million “Octopus”, originally commissioned in 1998 by Microsoft co-founder Paul Allen, which includes a 10-man submarine and two helipads. Allen died in 2018, a reminder that even for the egregiously rich, the partying will always come to an end at some time.

“Octopus”, the superyacht that once belonged to Paul Allen, is seen in Hong Kong waters in 2007. The luxury yacht, one of the largest in the world, reportedly fetched US$278 million when it was sold last year. Photo: K.Y. Cheng

Demand for private jets has soared by 50 per cent, according to Honeywell’s Global Business Aviation Outlook, as the super-rich have sought to avoid crowds and potential Covid-19 contagion as they travel.

Meanwhile, providers of more workaday luxuries have also been celebrating. The BBC reported this month that caviar sales worldwide had surged. According to Carla Sora at Agriottica Lombarda, Italy’s biggest caviar farm, “people in lockdown wanted to enjoy themselves, and everybody decided to spend money on caviar”. So too have luxury watchmakers like Audemars Piguet and Vacherin Constantin reported spikes in sales.

I will confess that those who detect a smidgen of envy may not be entirely wrong. Despite a Methodist upbringing, I have not been stripped entirely of the urge to enjoy the modest comforts of life.

To be fair, I have little to be jealous about: while I might never be able to savour the most exclusive pleasures of super-rich life, nor am I among those billions in developing countries for whom life is a grim struggle from birth. But as the “Inequality Kills” report stresses, the inequalities blatantly around us today are extreme and untenable. Concern is not just a matter of jealousy.

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Such inequality diverts precious resources that are urgently needed for education, health care and the battle against global warming – and for such basic needs as clean water and electricity.

A massive concern in a companion Oxfam report is the “morally unjustified depletion of the world’s scarce remaining carbon budget”. The report states: “People in the richest 1 per cent of the global population are set to have per capita consumption emissions footprints in 2030 that are … 16 times higher than the global average.”

Such amounts are also 30 times higher than the level needed to slow global warming to the declared 1.5 degrees Celsius goal.

Perhaps most dangerous of all, such inequality has the potential to create yawning political divides, some of which are already alarmingly clear in the US, and which are undoubtedly an important motivator in Beijing as President Xi Jinping develops his mantra of “common prosperity”.

These were of pressing concern too in the virtual Davos World Economic Forum last week, as more than 100 “Patriotic Millionaires” called on world leaders to make the mega-rich pay more tax: “As millionaires, we know that the current tax system is not fair … Few, if any of us can honestly say we pay our fair share,” they said.

When even the super-rich have become embarrassed by the inequality from which they benefit, surely it’s time to act.

As the Patriotic Millionaires group suggests, a tax that starts at 2 per cent for those with more than US$5 million and rises to 5 per cent for billionaires would raise US$2.5 trillion a year – enough to lift 2.3 billion people out of poverty and guarantee health care and social protection worldwide. This could surely be the starting point for a very important conversation.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view