Osman Şenkul
Pericles, regarded as one of Ancient Greece’s most powerful statesmen, was born in 495 BC and died in 429 BC. During his childhood, he studied under Anaxagoras, Damon and Zeno, and was trained by his teachers to become a skilled statesman. He entered political life at the age of thirty. In the elections of 461 BC, he was elected Archon (head of government) from the democratic faction. In 444 BC, he suppressed the opposition and proclaimed himself head of state. Upon becoming head of state in Athens, Pericles implemented reforms across the country. By enacting new laws, he established a system that shifted the tax burden onto the wealthy. He had Athens rebuilt from scratch and adorned it with numerous new works of art and architecture. He brought together Greece’s most renowned scholars in Athens.
Before Pericles, merchant ships would set sail for the Mediterranean in large fleets; when attacked by pirates, the shipowners would voluntarily hand over a certain amount of goods—collected amongst themselves—as ‘booty’, and then continue on their way. Although the pirates based in Rhodes did not always honour their word, trade in the Mediterranean had been conducted in this manner for many years.
However, as soon as the powerful Pericles took power, he set about improving the general welfare of the people. He implemented a major tax reform. The reform was essentially based on a significant increase in the taxes levied on the wealthy. The revenue collected was used to make substantial investments in Athens, and a major campaign was launched to ensure that no one remained homeless or without shelter. As recorded in historical accounts, the Attica region was experiencing its ‘Golden Age’.
When Pericles learnt that certain seafaring merchants engaged in export trade were losing large sums of money to pirates, he assigned part of his powerful navy to ensure the merchants’ safety, with the aim of putting an end to this. It was necessary to convert the merchants’ profits into tax revenue to be spent for the benefit of the Athenian people, rather than allowing them to fall into the hands of pirates. The more a merchant earned, the more tax could be collected.
Now, merchant fleets set sail accompanied by warships; after travelling together until they had passed through pirate-infested waters, they would reunite on the return journey and reach Piraeus, Attica’s famous port, without suffering any losses. However, on the final voyage of the fleet—which included the ship of Orsiphantos, one of the era’s most renowned merchants—pirates lured the Athenian navy’s swift, powerful galleys away from the merchant fleet using ‘decoy vessels’, carried out a massive raid, and vanished without a trace.
Orsiphantos and most of the merchants barely managed to save their lives and reached Athens having suffered enormous losses. The captains and commanders of the fleet’s vessels—which were exceptionally fast and highly manoeuvrable—failed to recognise the pirates’ trap; despite such a formidable military force, the merchants had suffered immense damage.
Indeed, Orsiphantos, one of the major victims of this attack, had returned to Athens having lost almost the entire profit of a trading season to the pirates; he was therefore extremely angry. In the pre-Pericles era, every merchant would hand over goods amounting to roughly one-tenth of their profits and return to Athens having still made a good profit. This time, however, everything they had was gone; they had lost everything. Orsiphantos had noticed that, during their last ill-fated voyage, the pirate ships had not come anywhere near the naval galleys, and he decided to exploit this situation.
During the same period, in Ancient Rome, there was also a type of tax known as the ‘tributum’, which the state levied directly from citizens to cover the costs of war and pay soldiers’ wages. First introduced in 406 BC, this war tax was generally calculated on the basis of land, property and wealth; in other words, the system of ‘taxing the rich more heavily’—as implemented by Pericles—was once again in force.
In subsequent centuries, too, in various countries—and particularly under wartime conditions—the wealthiest often became “the highest taxpayers” for a variety of reasons. For example, in the United States during the Second World War, in 1944, the marginal income tax rate for the highest income bracket reached 94 per cent. This rate continued into the post-war period and remained at 91 per cent until the early 1960s. Canada, too, raised its top income tax rate to 95 per cent in 1943 to finance the war economy and social programmes.
In the British tax system, which peaked during the war years, income tax was levied on the highest earners at marginal rates ranging from 98 per cent to 99.25 per cent, and this high-rate taxation policy continued until the 1970s.
In modern history, ‘wealth tax’ schemes—levied not only on income but directly on accumulated wealth—have also come to the fore. In particular, during the 1990s, countries such as Sweden, Finland and Germany regularly extracted a share of the wealthy’s assets through high wealth taxes. Today, the main European countries applying a general wealth tax include Norway, Spain and Switzerland.
Nowadays, however, particularly in developed countries, the excessive profits of companies—whose reach extends far beyond the borders of many nations and thus into their assets and consequently their incomes—are causing vast income disparities; the globally organised ‘Tax The Rich’ movement has emerged as a global socio-political campaign demanding that individuals and companies with ultra-high net worth pay a larger proportion of their wealth, with the aim of combating rising economic inequality.
Advocates of the movement call for the implementation of direct wealth taxes to fund social services, the closing of legal loopholes and the introduction of global minimum standards.
The movement’s momentum has gained pace through concrete legal measures and campaigns, driven in particular by the widening wealth gap. With the support of organisations such as the EU Tax Observatory and encouraged by groups of nations such as the G20, this initiative is exerting pressure for the implementation of a coordinated minimum effective tax rate of 2 per cent for multimillionaires and billionaires worldwide. Around 14 per cent of Americans, particularly in states such as California and Washington, are facing proposals for a ‘billionaire wealth tax’ and income tax in local and state referendums. Federal proposals, such as the ‘Ensuring Billionaires Pay Their Fair Share Act’, aim to impose an annual 5 per cent tax on excessive wealth.
In the UK, too, groups such as “Tax Justice UK” (Tax Justice UK)” and Oxfam – a global confederation of civil society organisations established to combat poverty, hunger and injustice worldwide – are calling for measures worth billions of pounds, including a 2 per cent minimum wealth tax on assets exceeding 10 million pounds.
Whilst critics of the movement argue that the implementation of heavy wealth taxes could lead to capital flight and hinder business growth, supporters contend that historical data shows wealth taxes have successfully stabilised progressive tax structures without triggering a mass exodus of the ultra-rich.
The study titled ‘Tax the Rich: 9 Reasons for a Wealth Tax’, prepared in 2022 by the Centre for Integrative and Development Studies, Alternative Development Programme (UP CIDS AltDev) at the University of the Philippines and published by Prof. Dr Eduardo C. Tadem, highlights the following points:
Rising inequality over the past 200 years has become an inevitable feature of global economic development. According to the United Nations’ Sustainable Development Goals, rising inequality affects 70 per cent of the global population and “threatens long-term social and economic development, undermines efforts to reduce poverty, and erodes people’s sense of fulfilment and self-esteem”; all of which “can lead to crime, disease and environmental degradation.”
As a fundamental response to this, civil society organisations, social movements, the media and academics have proposed a wealth tax targeting a country’s wealthiest citizens. A wealth tax is a tax levied on an individual’s net wealth, that is, on all forms of accumulated wealth. However, resistance from both the government and the business community has been fierce. In response, advocates have set out the justifications for a wealth tax in light of the current political, social and economic situation.
1 – Tackling inequality
The most important justification for a wealth tax is to reverse a centuries-old trend of rising inequality. Wealth taxes aim to move society in the opposite direction – that is, towards greater equality. Economist Jomo Sundaram emphasises the need to “raise more revenue from those with the greatest ability to pay, whilst reducing the burden on the needy”.
Surprisingly, both the World Bank (WB) and the International Monetary Fund (IMF) have announced their support for a wealth tax as a means of countering rising global inequality. This issue was raised at a joint WB-IMF conference held on 19 October 2021; the conference noted that “income inequality persists” and concluded that “a progressive tax policy is one of the main tools for addressing such inequalities”.
2 – Social unrest
Secondly, the wealth tax also aims to address social unrest and discontent. Incidents of unrest stemming from inequality include the Occupy Movement of 2011–12, the London riots of August 2011, the Yellow Vests uprising in France in 2018, Black Lives Matter, the #MeToo movement and the Fridays for Future movement.
All of these have mobilised people ‘around issues of racial, gender and climate inequality, transcending national borders and generations’. One of the main issues was institutional greed, which was seen to be in direct conflict with democratic principles.
3 – The regressive tax system
The third justification for a wealth tax is to rectify the regressive tax system currently prevalent worldwide. Whilst the wealth of the richest has surged, tax rates have plummeted. Conversely, tax rates for the low-income working class have become higher than those for billionaires.
Over the past forty years, these inversions have become increasingly pronounced as governments have implemented tax reforms that cut taxes for corporations and the wealthy whilst favouring regressive and consumption taxes. Consequently, the tax burden has shifted from the upper classes to the poorer classes.
4 – Widespread tax evasion
Fourthly, the wealthiest individuals are also the ones most frequently associated with widespread tax evasion. The world’s richest billionaires – particularly the owners of Amazon, Apple, Facebook, Google, Microsoft and Netflix – have avoided paying billions of dollars in tax by transferring their wealth to tax havens outside the US and setting up shell companies in those countries.
Research has revealed that the tax rates paid by the wealthiest billionaires – such as Warren Buffett, Jeff Bezos, Michael Bloomberg and Elon Musk – range from 0.10 per cent to 3.27 per cent, whilst corporate tax rates hover around 35 per cent.
In the Philippines, the wealthiest individuals are not necessarily those who pay the highest income tax. The Department of Finance’s Tax Watch service revealed that, for the year 2012, “only 25 of the 40 richest Filipinos listed by Forbes appeared on the Bureau of Internal Revenue’s (BIR) list of top individual taxpayers”.
Wealthy tax evaders can evade prosecution or penalties even when they are identified and charged accordingly. The BIR’s ‘On the Trail of Tax Evaders’ project has a woefully poor track record. Of the 929 cases brought against tax evaders between 2005 and December 2018—with a total tax liability of 148.35 billion pesos—only 14 have been concluded, and convictions were handed down in just 10 of these.
5 – Corporation tax exemptions
The fifth reason is that, in addition to paying an excessively low amount of corporation tax, the wealthiest individuals and families also benefit from the massive corporation tax reductions and exemptions provided by the government. Outside the scope of normal investment laws, the standard rules and regulations regarding taxation and other matters are suspended in areas such as Special Economic Zones (SEZs).
Whilst the standard corporation tax rate in the Philippines is 25 per cent, firms in SEZs pay no more than 5 per cent tax. Other advantages include tax-free imports and exports, whilst governments cover the costs of infrastructure development, such as airstrips and factory buildings.
6 – Unearned profits
Sixthly, a large proportion of the wealth held by the top tier of billionaires and the wealthy stems from unearned super-profits that are not channelled back into the economy through new or additional investment. This situation was calculated by comparing the ‘normal’ rate of return with the actual rate of return; this calculation can reveal instances where ‘profits exceed normal rates of return’.
Global corporations also generate what are termed ‘fictitious profits’. These are profits not based on added value or economic activity. The result is the transfer of wealth to specific actors who have no connection whatsoever to their roles in the economy.
7 – Profits obtained at the expense of labour
Seventhly, the issue of unearned profits relates to the decline in the share of labour within the gross value created through economic production; this decline is disproportionate to the increasing share of the capitalist class. This situation is justified as a ‘rebalancing between labour and physical capital’ on the grounds that companies have supposedly ‘substituted expenditure on labour inputs in production’.
However, as shown above, this substitution is deceptive. Furthermore, by passing on high prices to consumers that cannot be justified by production costs, companies are accumulating unearned profits at the expense of labour alone.
8 – Debt management
Eighthly, in order to generate resources to tackle the pandemic, governments – particularly in developing countries – have been forced to take on large amounts of external and domestic debt. This situation is leading to an impending debt crisis.
For example, the Philippine government’s debt increased by 20 per cent compared to the previous year. The debt-to-GDP ratio of 63.5 per cent has pushed the country above the recommended 60 per cent threshold for debt sustainability. As for increasing government revenue, taxation and borrowing have been the primary methods. Generally speaking, from the perspective of fairness and efficiency, taxation is by far the preferable option compared to borrowing. It is far better to tax the wealthy than to borrow from them.
9 – Financing COVID-19 measures
Ninthly, a wealth tax could make a significant contribution to financing measures to tackle the COVID-19 pandemic, particularly in developing countries. This could help to finance the purchase of vaccines, improve healthcare services and facilitate social assistance, emergency employment programmes and education campaigns. Since 2020, the Philippine government has been forced to borrow 1.3 trillion pesos and seek 2.7 billion pesos in foreign grants, primarily to procure COVID-19 vaccines.
As existing inequalities are multi-faceted, implementing a wealth tax is a significant step towards addressing many of the most pressing issues facing human societies. Furthermore, this could lead to compensation being provided to the billions of people worldwide who have been marginalised due to the system’s injustices.
Whilst the ‘Tax the Rich’ movement, which focuses on ‘high earners’ as much as possible at a global level, is gaining momentum and, as examples show, is being implemented to varying degrees in many countries, in Turkey it is the ‘asset amnesty’ and ‘tax exemption’ schemes that are taking centre stage.
The Asset Amnesty in Turkey is a legal and financial scheme that enables individuals or legal entities to place their unregistered assets (cash, gold, foreign currency, securities) held either domestically or abroad under legal protection by declaring them to the state. Provided that the low-rate taxes applicable to these assets are paid, exemption is granted from penalties such as retrospective tax audits and criminal proceedings. Under the current (2026) scheme, the basic declaration rate is set at 5 per cent. Furthermore, the tax rate may be reduced to as low as 0 per cent in cases where a commitment is made to hold these assets for five years in term deposits, government domestic debt securities (DİBS), lease certificates or venture capital funds. For individuals benefiting from the Asset Amnesty, risks such as tax audits, tax assessments or the imposition of penalties arising from the assets they have declared are eliminated.
Although high-profit companies in Turkey are not granted a special exemption solely ‘because they are wealthy’, the legal incentives and exemptions provided through large-scale investments, exports, R&D and financial centres significantly reduce the tax burden on high-profit companies.
Investment Incentive Certificates, issued by the Ministry of Industry and Technology for large-scale and strategic investments, offer the following advantages to holding companies and large firms. Furthermore, corporate tax reductions of up to 90 per cent are applied to profits generated during the investment period. No customs duty is payable on machinery and equipment imported by these large companies.
No VAT is payable on the purchase of machinery and equipment classified as investment goods.
Eighty per cent of profits derived from services such as software, architecture, engineering, design, data analysis and call centre services provided from Turkey to overseas customers are exempt from corporation tax. Profits from transit trade between two foreign countries, where goods do not enter Turkish territory, are deducted from the domestic minimum corporation tax base. Software and technology companies operating within R&D and Design Centres and in Technology Parks, which form part of large holding companies, enjoy significant exemptions.
100 per cent of R&D and innovation expenditure is deductible from the taxable base when determining commercial profit. Furthermore, between 80 per cent and 95 per cent of the salaries of researchers and software developers employed at these centres are exempt from income tax, depending on their educational qualifications. A special regime applies to major financial institutions and multinational companies operating within the Istanbul Financial Centre (IFC). Profits generated by institutions operating within the IFC from financial services provided abroad are exempt from the minimum corporation tax.
Of course, in addition to tax exemptions or reductions occasionally applied to specific companies or sectors, as announced last April, if individuals who have not been tax residents in Turkey in the past three years relocate to the country, their foreign-sourced income will not be taxed in Turkey for 20 years. These individuals will only pay tax on income earned within Turkey. Furthermore, the inheritance and gift tax rate for this group will be set at 1 per cent.
The 80 per cent tax relief applied to income derived from architectural, engineering, software and design services provided abroad will be increased to 100 per cent. Consequently, income from the export of services will be entirely exempt from tax. It will be possible to repatriate cash, gold and securities held abroad to Turkey subject to a tax of 2–3 per cent. No tax audit will be carried out on declared assets.
Alongside all this, when we look at current developments, we also see a significant slowdown on the tax front. In the first half of the year, Turkey paid 1 trillion 462 billion lira in interest on international borrowing, whilst the budget recorded a deficit of 975 billion lira. In contrast, only one-fifth of this interest payment – 267 billion lira – was available for investment. Presumably because the ‘Tax the Rich’ movement—which is highly influential at a global level and a pioneer of such initiatives in many countries—has not yet made a significant impact in Turkey, tax assessments totalling 13.4 trillion lira during the same period were recorded, whilst the amount actually collected stood at just 7.6 trillion lira.
However, whilst the tax burden on Turkish citizens may appear low on paper compared to international averages, it is felt to be particularly heavy in daily life relative to income levels, especially due to increasing poverty.
More than 60 per cent of the taxes collected in the country consist of indirect taxes (such as VAT and excise duties paid on purchases), which are paid by everyone regardless of wealth. Due to this structure, low-income citizens end up paying a much larger proportion of their earnings in tax. Consequently, amongst the substantial sections of society suffering from severe impoverishment—exacerbated by the deep income divide targeted by global movements—the search for a modern-day Pericles is increasingly being replaced by the ‘Tax the Rich’ movement, which is gaining momentum on a global scale.