The G20 summit in Brazil is raising the issue of taxing the ultra-rich, as Oxfam claims the world's richest one percent have gained over $40 trillion over the past 10 years. AP

The G20 finance ministers and central bank chiefs have issued a rare communique at the end of their meeting in Rio de Janeiro on Friday – Brazil will take over as president and host the next G20 summit this year – where it was declared, “We will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed.”

There is of course no mention about the proportion of tax to be levied. About two years ago, the G20 came to the conclusion that there should be a global minimum corporate tax of 15 per cent. Many of the members of G20 are market economies, with a firm belief in the virtues of capitalism. And the other developing countries in the group are also aspiring to be free market capitalist economies.

The principle of taxation, especially of the corporates and of the rich, goes against the capitalist credo. The general belief of those who advocate capitalism is that taxation is counter-productive. The rich capitalists are seen to be the engines growth, and that they should be allowed to create enterprises, generate jobs, while making profits. Taxing the rich is seen to be a disincentive, dampening the spirits of the rich. So why have the leaders of capitalist countries changed their views so radically on the issue of taxation?

It seems that after the global recession that was caused in 2007-08, and the government bailouts of mega-investment banks, there has been a rethink in the governments. It had become evident that when the private enterprises fall like ninepins through their own excesses, the government is the guarantor of last resort. And this has led to the conclusion that there is a legitimate need for the governments to collect taxes from the rich when the going is good.

There is unanimity of sorts among the rich nations about taxing their rich citizens, but those at the helm in the rich countries want to make this a universal rule. Many of the developing countries are not sure about this. The leaders of developing countries feel that the entrepreneurs in their economies sill need tax rebates for them to gain success and create jobs.

What might be a good idea of taxing the super-rich in the rich countries would not be applicable to the aspiring rich of the developing countries. It had been argued by the economists in the rich, developed countries is that taxing the rich is not the way to grow the economy. Low taxes, they said, was the ideal solution. The taxation argument has now been turned upside down.

There is the recognition that there is need for further discussions on the subject, there is a division about the forum. US Treasury Secretary Janet Yellen thinks that the issue of the tax on ultra-high-net-worth individuals should be discussed at the Organisation of Economic Cooperation and Development (OECD), which is a group of rich countries, and not at the United Nations. She is of the view that the UN lacks the technical expertise to tackle the tax issue.

Oxfam is not convinced. Oxfam International’s Tax Policy Lead Susana Ruiz said, “Entrusting this task to OECD – the club of mostly rich countries – would simply not be good enough.” Brazil’s finance ministry official Guilherme Mello said that both the UN and the OECD are legitimate forums, but the issue needs to be discussed more.

But experts in Europe feel that this tax on the super-rich would be a difficult one to push through. What is of greater importance is the change in stance over the issue of taxing the rich, whether corporates or individuals. And the rich countries want the tax on the rich should be global so that poor countries cannot attract the global rich with low tax incentives.