Thomas Picketty, a French economist who, as written in his highly-talked-about book ‘Capital in the 21st Century’ released in 2013, believes that wealth should be taxed in order to regulate capitalism, may live to see this desire happen, as the damaging aftermath of the HSBC scandal, Panama Papers and the clamp-down on corporate tax avoidance suggests. This could be only considered a good thing for everyday people, as taxes are a great way of funding a thriving society.
Picketty may be wrong, however, in suggesting that global growth is going to slow, thus allowing capital owners’ bank balance to rise in proportion to the incomes of normal tax payers. “Infra technological frontier” countries such as China, Nigeria, Indonesia and India may help keep global economic growth higher than the rate of return on capital. In 2013, the rate of return on capital was a bit above zero per cent (Picketty believes that in order for capital to create a more and more unequal society, the rate of return on capital needs to rise above 2.5 per cent).
It’s not unthinkable that the rate of return on capital may indeed go into negative territory. Also, it would seem to be the case that global convergence between Africa, China and India could take a century, or perhaps longer than that, to happen (global convergence would lead to lower growth rates and the rise in prominence of capital, which could send Europe and North America back to the nineteenth century in terms of economic equality). Indeed, the convergence may never happen as the economies of countries from North America, Asia and Africa will likely go up and down, such that convergence may always be out of their grasp.
The rise in prominence of Picketty and his ideas about taxing wealth signal that the push to increase Ireland’s corporation tax will only grow more aggressive as time goes on.