Reassert tax sovereignty to unlock trillions for climate finance

Taxing extreme wealth can cover countries’ climate finance responsibilities with billions to spare

Applying a minimal wealth tax on the superrich and making multinational corporations pay the dodged taxes they owe can cover the majority of countries’ climate finance costs, and leave most with billions in tax revenue to spare towards public services.

A new report¹ by the Tax Justice Network – published today as the Bonn Climate Conference kicks off and publicly endorsed by renowned climate experts – finds that a major root of inadequate climate finance is not a lack of affordability but countries’ weakened tax sovereignty.

A total of $2.6 trillion in urgently needed tax revenue is available to be raised by countries each year, the report finds, by applying a minimal wealth tax of 1.7% to 3.5% on the richest 0.5% households, and by recovering the corporate taxes unpaid by multinational corporations shifting profits into tax havens.

The sum is equivalent to a whopping 2.4% of global GDP², and can cover most of the spectrum of climate finance estimates proposed by climate experts.

The resources countries need to ensure their survival are on hand, the report argues, but decades of undermining and restraining countries’ tax sovereignty – that is, their ability to decide how much to collect in tax, who and what from, and where to spend it – is preventing countries from being able to access these resources.

61% of countries were found to have an “endangered” level of tax sovereignty or worse, meaning the amount of additional tax revenue they are failing to collect from their richest households and from tax cheating multinational corporations was equivalent to 5% or more of the amount of tax they collect a year.³ About a fifth of countries (19%) were found to have a “negated” level of tax sovereignty, the worst level, missing out on the equivalent of 15% or more of the tax revenue they collect annually.

The report identifies several factors that have and are weakening countries’ tax sovereignty, include unfit global tax rules, decades-old exploitative tax treaties, colonial legacies and the influence of extreme wealth on public discourse and governments’ decision-making processes.

Franziska Mager, lead author of the report, said:

“The problem isn’t scarcity, it’s tax sovereignty. Countries are failing to collect the taxes they urgently need from the superrich to mitigate the climate crisis – a crisis that the superrich are most responsible for fuelling. Successfully exercising tax sovereignty to face off an existential threat is key to how states have historically ensured their survival, so this widespread failure is alarming.

“Fortunately, the UN tax convention currently being prepared is already on course to turn things around and reassert the tax sovereignty of all countries. Tax has been treated as a tool to cater to the superrich for so long, our governments forget that tax first and foremost represents the will of a people. We must reclaim tax as a tool for protecting people and planet, and that includes protecting from the harms of extreme wealth.”

Modelling debunks false choice of domestic needs vs climate finance

The Tax Justice Network new report models how countries can spend the additional tax revenue they can raise on both contributions to a global climate finance fund and to domestic needs, including public services.

For most countries and in most scenarios, the amount of additional tax revenue countries would have left to spare towards domestic needs after meeting their climate finance contributions would be greater than the amount they contribute.

If countries were to contribute a share to a global climate finance fund that is proportional to their share of historical emissions, 89% of countries would be able to cover their contribution with change to spare assuming a conservatively sized fund of $300 billion on the smallest end of the spectrum. On average, these countries would have to contribute just 21% of their additional tax revenue to the global fund and would be left with $14 billion to spare towards domestic spending.

Assuming a fund 5 times larger at $1.5 trillion, 58% of countries would be able to cover their climate finance contributions, contributing 44% of their additional revenue, would be left with $12.6 billion to spare on average.

While not all countries in these models would be able to meet their contributions, the total size of the funds in these scenarios could still be met if other countries were to contribute a bigger share of their additional tax revenue to the funds. The Tax Justice Network has published an interactive tool⁴ alongside its new report that can be used to model different fund sizes and contribution commitments.

Some examples of how much certain countries can contribute and be left with to spare:

• The US would be able to contribute $70 billion from additional tax revenue towards a global climate finance fund of $300 billion and be left with $707 billion for domestic spending. For a fund of $1.5 trillion, the US would be able to contribute $365 billion with $412 billion to spare. The US was found to have a “endangered” level of tax sovereignty, failing to collect the equivalent of 11% of its annual tax revenue.
• The UK would be able to contribute $13 billion from additional tax revenue towards a global climate finance fund of $300 billion and be left with $64 billion for domestic spending. For a fund of $1.5 trillion, the UK would be able to contribute $65 billion with $12 billion to spare. The UK was found to have an “endangered” level of tax sovereignty, failing to collect the equivalent of 7% of its annual tax revenue.
• France would be able to contribute $6 billion from additional tax revenue towards a global climate finance fund of $300 billion and be left with $58 billion for domestic spending. For a fund of $1.5 trillion, France would be able to contribute $33 billion with $31 billion to spare. France was found to have a “challenged” level of tax sovereignty, failing to collect the equivalent of 4.5% of its annual tax revenue.
• China would be able to contribute $47 billion from additional tax revenue towards a global climate finance fund of $300 billion and be left with $627 billion for domestic spending. For a fund of $1.5 trillion, China would be able to contribute $236 billion with $438 billion to spare. China was found to have a “negated” level of tax sovereignty, failing to collect the equivalent of 17% of its annual tax revenue.
• India would be able to contribute $11 billion from additional tax revenue towards a global climate finance fund of $300 billion and be left with $99 billion for domestic spending. For a fund of $1.5 trillion, India would be able to contribute $53 billion with $57 billion to spare. India was found to have a “negated” level of tax sovereignty, failing to collect the equivalent of 18% of its annual tax revenue.
• Brazil would be able to contribute $3 billion from additional tax revenue towards a global climate finance fund of $300 billion and be left with $53 billion for domestic spending. For a fund of $1.5 trillion, Brazil would be able to contribute $15 billion with $41 billion to spare. Brazil was found to have an “endangered” level of tax sovereignty, failing to collect the equivalent of 8% of its annual tax revenue.

The modelling shows that for the majority of countries pitting climate finance commitments against domestic needs is a false dichtomy. On the contrary, paying for both requires a strengthening of tax sovereignty.

Prof. Jayati Ghosh, award-winning economist and co-chair of ICRICT, said:

“It is obscene that the poorest people and countries must bear the brunt of a crisis they did not cause, while the richest individuals and corporations hoard wealth and escape taxation. The claim that taxing corporate profits threatens growth is a fiction crafted to protect powerful interests. Today’s tax rules enable profit shifting and deprive, especially in the global South, governments of vital revenues for climate action and public services. This is not a design flaw but the outcome of a system shaped by long-standing, deeply rooted global power imbalances. Taxing extreme wealth and multinational profits is not just a policy option. It is a moral and economic imperative. If we are serious about a just transition, we must confront and reverse the inequalities embedded in the global economic architecture, starting with tax.”

Olivier De Schutter, United Nations Special Rapporteur on extreme poverty and human rights, writes in his foreword to the report:

“Just as the climate crisis and inequality are man-made, so too is the myth that we do not have the resources to address them. This report shows the trillions in untapped revenue hidden in plain sight. Taxing extreme wealth and curbing corporate tax abuse could unlock more than enough to fund a just transition, while redressing the staggering inequalities that are driving our world towards collapse.”

Prof. Attiya Waris, UN Independent Expert on foreign debt, other international financial obligations and human rights, said:

“Transforming international tax rules is just one part of the story. Across the global south, care and climate responses are being sacrificed to servicing debts that dwarf the funds we need for a just transition. these sacrifices reflect an international financial order that continues to prioritise creditor claims over human and planetary wellbeing. Reclaiming taxing rights, cancelling illegitimate debt, demanding reparations for historical and ongoing extraction, and embedding climate finance within a human rights framework are the cornerstones of fiscal sovereignty. Across the global north we have a continuation of militarisation of economies intended for sale to and use in southern states. If we do not break the grip of debt payments and corporate tax abuse on public budgets, we risk further consolidating global inequality rather than dismantling it.”

-ENDS-

Contact the press team: [email protected] or +44 (0)7562 403078

Read the report

Explore the interactive tool

Notes to Editor

1. Read the report here.
2. Based on the World Bank’s most recent estimate for global GDP, which puts it at $106.17 trillion in 2023.
3. The following table provides a summary of where countries fall on the tax sovereignty scale.

* Data unavailable on the amount of additional tax revenue that can be raised from applying a wealth tax.

4. Explore the interactive tool here.