Covid-19 economic crisis will be felt by the poor for a decade, report finds

It could take more than a decade for the world’s poorest people to recover from the economic effects of the Covid-19 pandemic, a new report finds.

According to Oxfam’s Inequality Virus Report, released on the opening day of the World Economic Forum’s Davos Dialogues, it took just nine months for the fortunes of the top 1 000 billionaires to return to their pre-pandemic highs. The world’s 10 richest billionaires — who are all men — saw their earnings skyrocket in 2020.

For the world’s poor, the pandemic’s devastating ripple effect will be felt for many years to come. And, as a result, inequality risks being “supercharged”, the report finds.

Oxfam’s survey of 295 economists from 79 countries found that 87% of respondents expect an increase or a significant increase in income inequality in their country because of the pandemic.

At a Davos press conference on Monday, executive director of Oxfam International, Gabriela Bucher, said that in 2021 governments must “wake up” to address the world’s inequality crisis. The world risks slipping into the worst crisis of inequality on record, Bucher said.

During her address, Bucher emphasised the importance of vaccine equality. “I am here at Davos, in this virtual way, to push for a people’s vaccine. So that we can all get a jab against the virus, not just the richest countries and people — which is what’s happening.”

The Oxfam report notes that the increase in the wealth of the 10 richest billionaires since the crisis began “is more than enough to prevent anyone on Earth from falling into poverty because of the virus and to pay for the Covid-19 vaccine for everyone”.

The report advocates for the increased taxation of the wealthy and big corporations. “We must look back on this crisis as the moment when we finally started to tax the rich fairly once more — the moment that the race to the bottom ended and the race to the top began … Progressive taxation of the richest members of society is the cornerstone of any equitable recovery from the crisis, as it will enable investment in a green, equitable future.” 

A tax on the excess profits earned by corporations during the coronavirus pandemic

could generate $104-billion, the report notes. This is enough to provide unemployment protection for all workers and financial support for all children and elderly people in the world’s poorest countries.

In South Africa, economists and tax experts have floated the idea of a wealth tax to stem inequality and help to fund the country’s vaccine rollout. 

In a proposal on taxation ahead of the 2021 budget, the Institute for Economic Justice (IEJ) noted that South Africa has no annual “net wealth tax”, despite high levels of wealth inequality, and that income derived from wealth is under-taxed.

Wealth inequality in the country reproduces inequalities and increases inefficiencies across the economy, the proposal reads. “These inequalities are likely to be exacerbated by the Covid-19 pandemic.”

The IEJ recommends that, among other taxation measures, a wealth tax should be implemented as soon as feasible.

Last week, after news broke that the treasury is considering raising taxes to fund the vaccine, Judge Dennis Davis backed a one-off solidarity tax or surcharge. Davis headed the committee appointed in 2013 to examine how the country’s tax system aligns with its economic growth.

A once-off escalating surcharge that targets higher-income earners would be the most equitable solution to the country’s funding woes, Davis told Business Day.

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