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Wednesday, October 26, 2016
- While the Greek bailout and stimulus package dominated discussion among the Group of 20 (G20) major industrialised and emerging market economies at the high-level summit in Cannes, France, this week, the proposed financial transactions tax (FTT) received meagre attention. Dubbed by some economists and activists as the ‘Robin Hood Tax’, the FTT has enjoyed marginal but sustained support from hard-hitters in the G20.
Back in February, French President Nicolas Sarkozy nudged Microsoft co-founder Bill Gates to prepare a report on the enourmous potential of such a tax to jump-start development in poor countries, particularly after the 2008-9 crash pushed many donor nations to slash their official development assistance (ODA) to the global south.
A ‘technical note’ from the report, released at the World Bank and International Monetary Fund spring meetings in Washington D.C. in September, claimed that the adoption of an FTT by the G20 or even the European Union could generate “substantial resources.”
According to the note, “Some modeling suggests that even a small tax of 10 bp (basis points) on equities and two bp on bonds would yield about 48 billion (dollars) on a G20-wide basis, or 9 billion (dollars) if confined to larger European economies. Some FTT proposals offer substantially larger estimates, in the 100-250 billion (dollar) range, especially if derivatives are included.”
Eyes on Europe
Many experts were fearful that if the EU crumbled further, the global impacts, especially in developing countries, would be severe.
Alan S. Alexandroff, director of the Digital20 Project at the Munk School of Global Affairs at the University of Toronto, told IPS that the current global economic architecture meant that any regional crisis posed grave threats to other, interdependent parts of the world.
“Since China’s major export market is Europe, it is going to be a very difficult problem for China if they cannot export because the economy in Europe is under stress,” he said, adding that India and Brazil were also vulnerable to shock waves emanating from the Eurozone.
Samuel A. Worthington, President and CEO of the U.S. umbrella organisation InterAction, told IPS, “The Greek crisis, the broader euro crisis, as well as the fiscal crisis in the U.S. have a direct negative effect on the developing world.”
“It decreases remittances; it decreases bank investments around the world, particularly with European banks in Africa; and it makes the overall prospects of global growth lower,” he added.
Strong push for financial transactions tax
Luckily, the release Thursday of Gates’ long-awaited report, entitled ‘Innovation with Impact: Financing 21st Century Development,’ shed light on alternative methods of boosting ODA, even under economic pressure, through innovative development financing schemes.
Touching on a broad range of issues, the report stressed, “well designed aid reduces poverty right now, and accelerates poor countries’ progress toward the moment when they will no longer need it.”
It outlined the proposal of a tobacco tax, an idea promoted by the World Health Organisation (WHO) and also suggested taxes on aviation and bunker fuels, which would serve the dual purpose of addressing environmental concerns about pollution and over-exploitation of natural resources, as well as generating substantial revenue.
Finally, the report called outright on the G20 governments to commit to the FTT. According to the report, even taxing financial transactions at the minimal scale of 0.001 percent would mobilise billions of dollars towards developing countries.
Various international and development NGOs warmly welcomed Gates’ support on these issues.
Luc Lamprière, Oxfam’s spokesperson at the G20, said in a statement on Thursday, “Gates’ enthusiasm for an FTT and a carbon charge on shipping and aviation should encourage champions like France, Germany, and Brazil and convince sceptics like Canada, UK and the U.S.”
But as Worthington pointed out, “unfortunately, the trend seems to be going in the opposite direction.”
While some G20 countries have already implemented their own versions of an FTT at the national level – namely South Korea, South Africa and Brazil – influential countries like France are looking for a coalition, or collective agreement on the issue. Worthington believes that “France is afraid to act in isolation” for fear of putting Paris’ markets at risk.
Sarkozy eventually closed the G20 meeting in Cannes on Friday with the announcement that ten out of the twenty countries support the implementation of the tax, though no concrete action plan was put in place.
The U.S. and the UK refused to agree to the FTT, but were convinced to mention it in the final communiqué – a significant step forward, according to Khalil Elouardighi, a relentless advocate of the tax through Coalition Plus.
With a strong coalition of countries throwing their weight behind the FTT, NGOs expect that nothing will keep it from being implemented.
Last Friday, the Leading Group on Innovative Financing and Development published a draft treaty on the FTT, complete with a blueprint for action beginning in September. The group plans to meet in Madrid on Dec. 29, at which point many hope that the leaders will be true to their word, and sign a concrete treaty on the tax.