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Welcome back Class! Hope you had a great weekend!
Last time we covered why we need more tax revenue and why we are looking to you. Today we will look at where this should come from.
Raising Additional Revenue
Several measures have been proposed and they are broadly as outlined below. A brief discussion on the merits or otherwise of each follows.
· Increasing Consumption Taxes (Goods and Services Taxes)
· Increasing Income Taxes
· Increasing Taxes on Companies
· Capital Gains Tax (CGT)
· Increasing Taxes on Wealth
· Automation Taxes
Increasing Consumption Taxes
I know many of you would prefer an increase in consumption tax because it would spread the load over the entire community and be in proportion to their spending. However, even though the wealthy might spend more, it would not be as much a proportion of their income as it would be for most workers, thus burdening them unfairly again and leaving them even less to spend elsewhere in the economy.
When Goods and Services Taxes are added to unavoidable expenses such as plumbing repairs and insurance, it pushes up the cost -of -living even more, and this is already unsustainable for many people, given that wages have remained static for forty years. Indeed, it is likely to make even more people dependent on the public purse or needing concessions, thereby defeating its fund -raising aims.
It's also bad for business. When workers are squeezed by higher taxes, they cut out things like visits to the hairdresser, the local bakery or newsagent or that café, which are the lifeblood of local economies and employ a surprisingly large number of people. In Australia small businesses employed over 5 million people — 39% of the private sector workforce in 2023-24, while mining employs only around 2.1% of all Australian workers. That's roughly twenty times the employment share, despite mining generating far more raw earnings. Nor is the damage confined to the local economy.
Financially strapped workers also put off replacing cars and appliances and reduce spending on non essentials such as holidays, their Netflix subscription or a family meal, all of which would most likely damage the economy more than it would bring in. Ultimately this also impacts tourism and big international corporations as well. Take McDonald's for example. In the US, McDonald's foot traffic fell 4.5% in Q2 2026, worse than the industry's average 3% decline, and any growth it did report, came entirely from higher prices, not more customers.
Income Taxes on Earnings
Many of the same constraints apply to increasing income taxes. Though an argument could be made that in low – taxing countries (see the table in the previous post) it could be increased or at least brought closer to the former levels of the 1970s, when the economy grew steadily and so did wages, many individuals are already at the margins of survival, as are the businesses which they support, so it is probably not a good idea to push them over the edge with additional taxes.
In addition, we aren’t always comparing apples with apples either. In the Scandinavian countries things like healthcare and even university education are included in the higher tax as are higher unemployment or retirement benefits, paid holidays and parental leave, whereas in other jurisdictions those things come at additional cost to the individual, or there are other taxes such as wealth, property or inheritance taxes, which may make the initially low - seeming income tax, much less attractive.
Every low-tax jurisdiction makes up the difference somewhere. Switzerland for example, taxes wealth annually instead of profits, earnings or capital gains. Ireland relies on a broad consumption tax of 23% and solid personal income tax for its residents for most of its tax revenue to make up for its somewhat lower 12.5% Company Tax.
Income Tax in Ireland is 20% (standard rate) on incomes up to €44,000 but rises to 40% on everything above that threshold. On top of that, most workers also pay USC (Universal Social Charge, 0.5–8%) and 4% Pay-Related Social Insurance) (PRSI). Combined, the marginal rate for higher earners can reach 52% (40% income tax + up to 8% USC + 4% PRSI).
Singapore’s somewhat more favourable income tax rate of 24% for top earners, is not all that different to that of other OECD countries once you add in its compulsory Central Provident Fund (CPF) contributions – A levy of 20 % of monthly salary for employees earning more than $750 a month, and 17% comes from employers) which covers things like housing, healthcare and retirement, as well as money for infrastructure and start -ups. Though this does not apply to foreign workers, they receive none of the benefits either.
The CEO Pay Gap Problem
There is however, definitely a case to be made for increasing the tax on higher earners. CEO compensation at the largest US firms rose 1,085% from 1978 to 2023, while typical worker pay rose only 24% over the same period (Economic Policy Institute). Between 1978 and 2023, the CEO-to-average-worker pay ratio in the USA moved from about 20-to-1 to 290-to-1. Since 2018, large US public companies have been legally required to disclose this ratio — though smaller and newly public companies are exempt.
Apologies for using McDonald's as an example again, but I did look up their report. Its CEO, Chris Kempczinski was paid over $20.5 million in 2025 — more than a thousand times the company's median worker pay of $19,020, itself barely above the US poverty line of $15,960. Only $1.6 million appears as income with $8 million appearing as his stock award and and a further $8 million as stock options, along with the use of the company jet and so forth.
As only the smallest part is classed as salary, it attracts a much lower tax rate than say, the 52% at the top end of the scale in Ireland, or even the 37% top marginal income tax rate in the USA. (We will talk more about capturing the other part, when we come to Wealth Taxes, but I hope you can see now why they are as important, if not more so, than income taxes from ordinary workers and why inequality has risen so much).
A few jurisdictions are trying to address this directly. Senator Bernie Sanders' Tax Excessive CEO Pay Act introduced repeatedly since 2019 — most recently in September 2025, has yet to pass, but would raise a company's corporate tax rate on a sliding scale tied to its CEO-to-median-worker pay ratio. A company which pays their CEO more than 50 to 100 times what their typical worker earns would attract a 0.5% penality and rise to a full 5% once the gap passes 500-to-1. According to its proponents, had the tax been in effect in the USA since 2022, it would have raised over $150 billion over 10 years. Portland, Oregon and San Francisco have already passed local surtaxes on exactly this basis. The UK and India, meanwhile, have taken a lighter-touch approach, simply requiring companies to disclose the ratio publicly and let shareholders and the public judge for themselves.
The extremely wealthy do even better even by conventional measures. Jeff you paid no income tax in 2007 and 2011, Elon, I understand that you paid none in 2018. Michael Bloomberg paid none several times in recent years and George Soros paid zero three years running. That "buy, borrow, die," strategy you have perfected Elon, Mark, Jeff and Larry E., where you borrow against your shareholdings for your day -to -day expenses, is sheer genius when it comes to tax since loans aren't income, and in the 34 remaining non-wealth-tax OECD countries, unrealised holdings aren't touched either. In some, the loan interest may even be deductible.
And is it true Jeff, that in 2011 you even claimed and received $4000 in child tax credits, despite sitting on $18 billion in wealth, because your declared income that year was so low? I wonder how many working class children were deprived of decent food for that effort? If ever proof was needed that merely being wealthy and even smart, doesn't qualify you to run a country, that would be it. I just wish you boys would apply your undoubted talents in more socially desirable ways. And Peter, you need to go back and reread Part II to see how much government intervention was needed to recover from the Great Depression and create the conditions for the prosperity which continued until the 1970s.
Between 2014 and 2018, the 25 wealthiest Americans paid an average of just 18.2% of their reported income in federal tax, and the highest 400 income earners paid only an average 22.6% between 2013 and 2018, still well below the top marginal rate of 39.6%, thanks to deductions, minimal reported wages, and the many other levers available once income is large enough.
Here too, a much larger proportion of wealth comes from shareholding and other assets, not income from daily work. I understand why you would want to game the system. No one likes paying taxes, but spare a thought for the ordinary worker whose tax is deducted before they even see their pay packet. I also don't see why an ICU nurse working horrible hours at a difficult job, should end up paying a higher proportion of his or her earnings in taxes than someone many times richer. Perhaps one of you would like to explain that to me after class.
Closing the Loopholes
While ordinary workers are more or less a captive market when it comes to income taxes, the more mobile could try to relocate to lower taxing jurisdictions.
One of the more aggressive ways to prevent that happening is to do what the US does. The US taxes its citizens on worldwide income for life, regardless of where they live or where the income was earned, simply because they hold US citizenship. A US citizen living permanently in Singapore, earning all their income there, still owes the IRS a return every year and potentially tax (with credits/exclusions like the Foreign Earned Income Exclusion to prevent full double taxation), but the filing obligation and residual liability never go away. The only way to escape it is by formally renouncing US citizenship — which itself triggers an exit tax on unrealised gains above a threshold.
Prior to April 2025, the UK used to allow non -UK residents who claimed foreign "domicile" to avoid UK tax on foreign income and gains, as long as they didn't bring the money into the UK. Since then the UK has moved to taxing worldwide income and gains for all residents, regardless of where they arise.
From around 2010 onwards, it has become much more difficult
to secretly squirrel income away in offshore tax havens. In 2010 the USA passed
its Foreign Account Tax Compliance Act (FATCA) which requires foreign financial
institutions worldwide to report their American account-holders' details
directly to the IRS. Institutions that refuse face a 30% withholding penalty on
their own US-source income.
The OECD has developed a separate mechanism Common Reporting Standard / Automatic Exchange of Information (CRS/AEOI), approved in
2014, based on this idea, with around 120 countries now automatically exchanging
their residents' offshore account information with each other every year,
rather than each country having to demand it individually the way FATCA does
for the US alone.
Increasing Company Tax
Company Tax applies to the profits made by a business. These also vary greatly by country as we’ve seen from the table in the previous lesson, and particularly in the case of America and also Switzerland, they can even vary by state or canton. Indeed Jeff, I believe you have achieved low tax status in many instances, by aggressively playing off one region against another. Very large multinational enterprises have even more options, since they can reduce their liability by international transfers between their various subsidiaries, low -tax jurisdictions or creative loan structures, which also reduces their tax liability.
As we’ve also noted previously, raising higher taxes on small local businesses, which do not have the option of relocating, does indeed mean reduced investment or diminished profitability, so taxing them more doesn’t make good sense either. Taxing larger domestic industries or businesses which are exposed to international competition is also counter -productive, since it would make them less competitive as well as reducing their ability to lower costs by say, adopting new technologies.
Large global concerns also face international competition, but have more options available to them. They can not only relocate more easily, but reduce their tax liability by moving profits between subsidiaries, borrowing internally or booking earnings wherever the rate suits them. A recent estimate puts the cost to the US economy of profit -shifting to zero or low -taxing regimes, at around $80 billion annually. [Individual tax avoidance is estimated to be between $40 and $70 billion].
Closing the Loopholes
However, moves are afoot to regulate companies. Controlled Foreign Corporation (CFC) rules date from 1962 and seek to stop profit-shifting into shell entities regardless of the individual's residence or where the profit is booked and are now mainstream policy among high-income, high-tax nations trying to protect their domestic tax base — the US, UK, Germany, France, Sweden, Finland, Norway, Iceland, Portugal, Spain, Italy, Hungary, Greece, Russia, Japan, South Korea, Australia, and New Zealand all have them, among more than 50 countries worldwide that have adopted their own version since the US pioneered CFC rules back in 1962.
With the US losing an estimated I trillion dollars to tax havens each year, the US passed its own minimum tax regime -the Global Intangible Low -Taxed Income (GILTI, now known as NCTI) in 2017. This seta a minimum tax rate of around 12.6 -14%, less any tax already paid in the original jurisdiction. It applies only to profits earned in foreign countries.
Rather than having each country trying to develop its own system and to prevent companies shopping around for lower taxes, the OECD developed a model for a uniform 15% company tax on multinational corporations in 2021. By 2026, 140 countries had agreed to, if not fully implemented, the new standard, although the USA has elected to retain its own system, rather than join.
Enforcement
In 2000 the OECD had a blacklist of 35 non – cooperative countries, however, as those countries signed information -sharing agreements, they were progressively removed and the OECD has shifted entirely toward the Global Forum peer-review process and CRS/AEOI rather than maintaining a punitive list.
Mind the Gap
From 2017 onwards, the European Union has also maintained an EU tax haven blacklist/grey list of non-cooperative jurisdictions and has used it to pressure some Caribbean and Pacific jurisdictions into tightening substance rules. The blacklist currently has around ten names, though notably it has never included any EU member state itself which critics point to as a major credibility gap. In 2025 the EU was losing approximately €100 billion a year in lost tax revenue.
Places such as Monaco, Liechtenstein, Isle of Man, and Malta are all exempt, as are countries such as Ireland, Luxembourg, and the Netherlands* which, according to Oxfam's definition, should technically be on the EU's blacklist too, — but the list only covers non-EU jurisdictions. Monaco, the Isle of Man and Liechtenstein have however, signed bilateral cooperation agreements and transparency/information-exchange commitments to satisfy the Code of Conduct Group's criteria.
*Although the Netherlands complies with minimum tax standards and has a beneficial ownership register, (see below) it still enables profit -shifting via shell companies to lower -taxing countries. While not illegal, these structures deprive public services of billions and leave the citizens and small businesses in higher taxing countries to foot the bill.
Ireland is also in the naughty corner for much the same reason. From what I have been reading, you Sergey and Larry do something similar - a “Double Irish with a Dutch Sandwich” to shift billions in profits via Ireland to Bermuda, thereby avoiding about $2 billion a year in tax. No wonder you made such outstanding profits in 2025 - what was it - $92 billion for your Sergey and $101 billion, for you Larry, and have taken your personal wealth to more than $260 billion each.
Sanctions against blacklisted countries may include higher withholding taxes, non -deductibility of costs, CFC rules, less access to EU funding, increased audit requirements or limiting dividend exemptions, but states can choose what action they will take, rather than acting in concert and all of them being applied at once.
Beneficial Ownership Registers
- Australia
is proceeding with a public, Commonwealth-operated register of beneficial
ownership information for unlisted companies, aligned with the
modernisation of the Australian companies register (ASIC)
- Malta
has amended its beneficial ownership framework to strengthen transparency, while balancing the protection of personal data. Limited access only.
- Liechtenstein’s
beneficial ownership register was temporarily closed for external users
following a cyber incident involving the unlawful extraction of data from
31,000 legal entities
- Monaco
is included in the Open Ownership map of countries taking action on
beneficial ownership transparency, but has no public register and transparency efforts remain minimal.
- Panama, Turkey and Vietnam are on the Grey List -that is, they have committed to reforms but face delays or weak enforcement.
Capital Gains Tax (CGT)
Over the past 40 years far more wealth has accumulated from share trading and property speculation than from physically working for someone else. In addition, many high-level employees receive compensation in the form of stock options as part of their salary. The true value of such assets is difficult to ascertain, except when these are sold.
Many governments seek to capture some of this stored value then by charging Capital Gains Tax (CGT) on the increase in the value of those assets — shares, property, business interests. Some 150 countries have CGT of some type or another, however what is taxed and how much differs greatly.
The real issue with CGT however, is that many shareholdings are never traded or converted to cash. Indeed, Warren Buffett, one of America's richest billionaires was able to build his fortune by never paying dividends, precisely so the share value of his investment company, Berkshire Hathaway would compound untaxed rather than being distributed and taxed as income. Because of this, more countries are now looking hard at wealth taxes on unrealised assets and some already have them.
Alas, we are out of time again today, Wealth Taxes and Automation Taxes, will have to wait until our next class.
Thanks to Copilot for the Image, to Claude for wonderful discussions and source material and to Ecosia and ChatGPT for general assistance when I have used up my time with others.
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