Food companies making big profits as inflation has surged should face windfall taxes to help cut global inequality, anti-poverty group Oxfam said Monday as the World Economic Forum’s annual meeting gets underway.
That’s one of the ideas in a report by Oxfam International, which has sought for a decade to highlight inequality at the conclave of political and business elites in the Swiss ski resort of Davos.
The report, which aims to provoke discussions on panels featuring corporate and government leaders this week, said the world has been beset with simultaneous crises, including climate change, the surging cost of living, Russia’s war in Ukraine and the COVID-19 pandemic, yet the world’s richest have gotten richer and corporate profits are surging.
Over the past two years, the world’s super-rich 1% have gained nearly twice as much wealth as the remaining 99% combined, Oxfam said. Meanwhile, at least 1.7 billion workers live in countries where inflation is outpacing their wage growth, even as billionaire fortunes are rising by $2.7 billion a day.
Tax the rich
To combat these problems, Oxfam called for higher taxes on the rich, through a combination of measures including one-time “solidarity” taxes and raising minimum rates for the wealthiest. The group noted that billionaire Tesla CEO Elon Musk’s true tax rate from 2014 to 2018 was just over 3%.
A “true tax rate,” is defined by ProPublica as the amount in taxes paid by the wealthiest Americans annually versus the estimated growth in their wealth during that same time. For instance, Amazon CEO Jeff Bezos paid $1.4 billion in personal federal taxes between 2006 to 2018 on $6.5 billion he reported in income, while his wealth increased by $127 billion during that same period. By ProPublica’s calculation, that reflects a true tax rate of 1.1%.
“A tax of up to 5% on the world’s multimillionaires and billionaires could raise $1.7 trillion a year,” according to Oxfam. “Enough to lift 2 billion people out of poverty.”
Some governments have turned to taxing fossil fuel companies’ windfall profits as Russia’s war in Ukraine sent oil and natural gas prices soaring last year, squeezing household finances around the world.
Oxfam wants the idea to go further to include big food corporations, as a way to narrow the widening gap between the rich and poor.
“The number of billionaires is growing, and they’re getting richer, and also very large food and energy companies are making excessive profits,” said Gabriela Bucher, Oxfam International’s executive director.
“What we’re calling for is windfall taxes, not only on energy companies but also on food companies to end this crisis profiteering,” Bucher told The Associated Press.
Oligopolies dominate food and energy
Oxfam said wealthy corporations are using the war as an excuse to pass on even bigger price hikes. Food and energy are among the industries dominated by a small number of players that have effective oligopolies, and the lack of competition allows them to keep prices high, the group said.
At least one country has already acted. Portugal introduced a windfall tax on both energy companies and major food retailers, including supermarket and hypermarket chains. It took effect at the start of January and will be in force for all of 2023.
The 33% tax is applied to profits that are at least 20% higher than the average of the previous four years. Revenue raised goes to welfare programs and to help small food retailers.
Oxfam said its analysis of 95 companies that made excess, or windfall profits, found that 84% of those profits were paid to shareholders while higher prices were passed on to consumers.
