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Thursday, June 20, 2013
- Europe’s apparent failure to forge broad agreement on introducing a financial transactions tax marks the latest setback for organisations counting on a similar worldwide fee to fund development aid in austere times.
A French-led push for a European Union tax on stock and bond trades is crumbling amid opposition from Britain and lukewarm interest in several other countries. Sweden opposes an EU-wide levy, and Irish Prime Minister Enda Kenny said last week he was against any such tax that was not applied globally.
The tax idea was first proposed by American Nobel laureate James Tobin in the 1970s and revived a decade ago to tame currency and financial speculation in global markets. It has gained favour among aid advocates and developing countries as a way to raise billions of dollars a year in richer countries to help poor nations grow and to adapt to climate change.
French President Nicolas Sarkozy and other European leaders who support the tax now hope to press ahead with a fee that would apply only to some EU countries using the euro currency or those willing to adopt it.
“We really hope that the French and the Germans and other countries within the eurozone will put the interests of the poor people of the world ahead of the financial sector that caused this mess,” said Jon Slater, a spokesman for Oxfam, the hunger-fighting charity that has been a leader in lobbying for the tax to fund aid.
“We do recognise the economic situation across the globe is a tough one – it’s a difficult environment to raise money for anything,” he told IPS by telephone from London. “But we basically think it’s important to present not only the moral case but practical ways in which governments could raise revenues to meet their promises.”
British Prime Minister David Cameron has repeatedly said he would oppose efforts to introduce an EU-wide financial tax which he says would harm London’s financial centre, the City. In November, the Group of 20 leaders spiked the idea at their summit in France, delivering a blow to European supporters including the meeting’s host, Sarkozy.
The European Commission, the EU’s executive, in September proposed taxes on trades in stocks, bonds and derivatives within the 27-nation bloc and estimated the fees would generate 57 billion euros each year, though it did not specify that the revenues should be spent on aid.
Sheila Page, senior research associate at the Overseas Development Institute in London, calls the idea of new taxes in the current economic climate “ridiculous”.
“No treasury likes tying a tax to a particular sort of spending, so regardless of whether it goes ahead or not, whatever revenue came out of it would just go into general revenue and be spent or just to draw down debt.”
Global aid organisations such as Oxfam, InterAction and ActionAid have long pressed for adopting the tax idea proposed by Tobin more than a generation ago. Charity groups often call it a “Robin Hood” tax because it would shift money from rich to poor countries.
Tobin’s idea was aimed at reducing speculation blamed for overheating economies and undermining currencies. But the idea only became practical in recent years with worldwide financial networks and technology that could track transactions in the blink of an eye, and aid advocates saw it as a natural way to fund growing needs and commitments.
The 2011 United Nations Human Development Report added its weight in calling for a 0.005 percent world tax on foreign exchange trading that it estimates would raise 40 billion dollars annually for poor countries, or nearly one-third the 130 million dollars in total development aid in 2010.
“The innovation of our report is that we are proposing that (the tax revenue) should be used for sustainability and human development purposes,” Khalid Malik, who heads the HDR office, told a conference in New York last month.
The annual UN report warned that climate change and population growth threatened to reverse progress on reducing poverty, noting that 1.5 billion people lack electricity and 2.6 billion have no basic sanitation. The UN also estimates that some 1 billion people – or one in seven humans – do not have adequate food.
Page, of the Overseas Development Institute, acknowledges the aid challenges but says holding governments accountable to their charity pledges makes more sense in today’s economic climate.
“I think it would be much more useful to concentrate on trying to make sure the commitments that are there are kept and that there aren’t further cuts,” she said, “rather than coming up with impractical ideas for how to find new taxes for it.”