Five years after the 2008 world financial crisis and two years after the Occupy movement it triggered, U.S. critics of the financial sector are coalescing around the idea of a Robin Hood Tax on financial transactions.

Bankers look down onto Robin Hood tax protestors gathered in New York City on Sept 17, 2013. Credit: Samuel Oakford/IPS

“The questions that Occupy raised are the right ones and it’s up to everyone else to come up with some answers,” said Robert Pollin, an economist at UMASS Amherst who works on financial transaction taxes (FTTs).

The idea, first floated by Nobel Prize-winning economist James Tobin in the early 1970s as a way to discourage overzealous currency trading, would, in its current iterations, levy a small duty on stocks, bonds and derivatives.

Though the debate over FTTs has long focused on curbing risky and unnecessary trading and “righting the market”, the Robin Hood movement attempts to shift it to one over human rights, fulfilling basic needs and not least a bit of payback for taxpayer bailouts of the financial sector.

For activists in the United States, the tax is part of what they hope will be a societal reorientation away from the privileging of an industry that has doubled its share of U.S. GDP since 1980 and drains other fields of the best and brightest.

FTTs exist in over 30 countries, many of them, like South Korea and Brazil, with some of fastest growth rates in the world.

“People don’t realise how tiny a tax we are talking about,” said Nicole Woo, director of domestic policy at the Centre for Economic and Policy Research (CEPR).

“There’s plenty of evidence out there that if revenues were to go to infrastructure spending, education and other public goods, it could increase GDP in the end and help increase employment,” Woo told IPS.

The Robin Hood Tax coalition, an umbrella group of sympathetic organisations, has put its weight behind a bill, “The Inclusive Prosperity Act,” introduced in the House of Representatives by Rep. Keith Ellison. The bill’s text is a strong critique of the financial sector and calls for the tax to pay for housing, healthcare and protecting the public sector and the environment.

The legislation would tax stock trades at 0.5 percent, bonds at .1 percent and derivatives at .005 percent.

The mix aims to “tax different markets equally”, Pollin told IPS, making it difficult for traders to flee one asset class for another. A tax in the U.S. would enjoy auto-enforcement on the part of market players because of the judicial security it provides.

“If you want to use the American legal system, you will have to trade here,” says Pollin.

Larry Summers’ decision to remove himself from consideration as chairman of the Federal Reserve in the face of a promised uproar among liberal members of Congress has Robin Hood supporters optimistic.

Summers is seen by many on the left as a leading architect of the financial crisis after he pushed for financial deregulation and opposed transparency in the derivatives market while serving as treasury secretary during the Bill Clinton administration.

A European proposal, agreed to by 11 countries, however, suffered a legal setback this month when E.U. lawyers delivered a non-binding opinion that found a continent-wide FTT used jurisdictional powers within states illegally. The decision is one of many roadblocks that supporters can expect to encounter.

For nurses at a Sept. 17 Robin Hood event in New York City, the events in Europe were noise.

“We looked around the globe and found nurses have the same issues everywhere. Austerity measures are killing us,” said Jean Ross, co-president of National Nurses United (NNU), a union of over 180,000 registered nurses and co-founder of the Robin Hood Tax coalition.

The union sees a Robin Hood Tax paying for many of the medical services which have been cut since the economic crisis.

An enemy weakened

For years, High Frequency Trading (HFT) was the oft-cited boogeyman when it came to pushing for a Robin Hood Tax. Critics claim the billions of daily trades distorted markets and added to volatility.

Fears were realised on May 6, 2010 when the Dow Jones Industrial Average fell more than nine percent only to regain those losses in a matter of minutes. Resounding blame was laid on trading algorithms that exacerbated an initial drop in the futures market. By 2012, HFT were estimated to be executing 84 percent of all trades on U.S. exchanges.

But as more HFT players enter the fray, returns in the zero sum game of shaving fractions of pennies off trades have decreased.

Large firms like KCG – itself formed when GETCO merged with near bankrupt Knight Capital after a haywire algorithm cost the latter over 400 million dollars in one day – have seen their profits cut by over three quarters from the height of the HFT boom, a period that coincided with the first volatile spurts of the crisis in 2008. Many have gone out of business.

KCG declined to comment for this story, as did industry leader Citadel Group.

That high-frequency trading may eat itself up underscores its social uselessness, says Woo. HFT proponents cite the volume and liquidity it creates – if bid and ask prices are nearly even, retail investors and pensions should pay lower prices. This is misleading, Woo told IPS.

“The liquidity provided by these traders is a sort of phantom liquidity because as soon as things start going south the computer algorithms pull all their money out, the liquidity just dries up completely,” she said.

HFT profits, even at their height, were small compared to those of the entire financial sector. Pollin’s models, using parametres similar to those set forth in Ellison’s bill, predict a drop in trade volume of at least 50 percent, putting U.S. market volume and capitalisation proportionally on par with Great Britain, where a tax of .5 percent already exists on stocks.

“Financial trading is an undertaxed sector of our economy,” says Woo.

Many even on Wall Street, especially those whose profits are reliant on long-term trends, agree.

A lack of tax on commodity trading can in fact be a burden on the average consumer. Legislation will help consumers by discouraging speculation in commodity markets, says Kenneth Zinn, political director at NNU. “There’s a surcharge on gasoline that’s simply Wall Street speculation.”

After watching a bruising battle over healthcare that ended in the Affordable Care Act, the nurses union is gearing for a fight with the financial industry, another special interest group which will fight tooth and nail to protect its privileged place in the economic pecking order.

Two European policymakers on Monday called on their U.S. counterparts to rethink opposition to proposals for a small tax on stock purchases and other financial transactions, which proponents say could raise hundreds of billions of dollars for poverty alleviation, action on climate change and financing international development.

“It’s quite important for us to see others moving at the same time,” Christopher Leslie, a member of the Labour Party and shadow financial secretary to the British Treasury, said Monday at a panel discussion here.

“It’s an incredibly brave journey by those countries in the European Union who have begun to enter into this … but I also want to persuade the United States to have a little think about this as well. We can all take small steps together in the right direction.”

The call comes just weeks after 11 European Union member states (though not the UK) announced that they would aim to impose such a levy, called a financial transactions tax (FTT), by the beginning of next year. That move signified the first time that EU tax decisions have been made by less than consensus, as well as the first time that any FTT has been imposed internationally.

To date, some 23 countries have legislated in favour of some kind of FTT, including the UK, Switzerland, Hong Kong, Japan and others. The United States remains the only major financial centre not to do so.

“We are ready to lead the way to show that FTT can and should be applied,” Algirdas Semeta, the European Commissioner for Taxation and Customs Union and the architect of the new 11-member agreement, said here Monday.

“A precedent will be set with a regional FTT in 11 member states – this is a chance to prove the benefits of a well-designed FTT and to confound the long-time cynics.”

Semeta says that several other countries have already expressed an interest in joining the new FTT zone – and hints at greater designs.

“Today, a global FTT may seem a very remote possibility,” he admitted. “But let’s not forget that even two years ago the same could have been said of a harmonised FTT in the EU. New ground is being broken.”

As for his current trip to Washington, Semeta continued: “We all know that the United States remains sceptical about the FTT. But the tax also has its supporters here, which I want to encourage.”

Washington scepticism

The idea of taxing transactions involving stocks, bonds and derivatives has been discussed by economists for decades. Yet it has seen a significant resurgence in recent years as governments around the world struggle to close holes in their budgets following the 2008 global economic crisis.

That budgetary drive has coincided with increased public and regulatory anxiety over the perception of an out-of-control financial sector in which speculation and overleveraging is rife. Proponents say an FTT could cut down on the incentive to engage in short-term computer-driven trading involving split-second transactions, which critics say massively increases volatility in global financial systems.

Both the U.S. government and business community remain against any such new levy. Yet until 1960 the United States, too, had an FTT, notes Lynn A. Stout, a law professor at Cornell University, which she says proves that doing so is politically feasible.

“The single biggest obstacle that I see to [doing so again] is simply the enormous amounts of money the trading middlemen – who are the only people who reliably profit from secondary market trading – have poured into press releases and political donations to try to convince average Americans that somehow they will be harmed by this,” Stout said at Monday’s panel discussion.

Indeed, in 2010 the International Monetary Fund (IMF) found that the U.S. financial sector was notably under-taxed, and many are now hoping that the E.U. decision could provide evidence to end the argument.

“This will be significant in the U.S. discussion, as one of major critiques that came from the [Obama] administration a couple years ago is that trades will move overseas, particularly to competitors in Europe,” Nicole Woo, director of domestic programmes, with the Center for Economic and Policy Research, a liberal think tank, told IPS.

“So this undermines that major critique, and also opens up the conversation to more seriously consider such an approach on our shores.”

For the moment, however, President Barack Obama’s administration has expressed opposition to the new EU proposal. A spokesperson for the U.S. Treasury told IPS in an e-mail, “[W]e do not support the proposed European financial transaction tax, because it would harm US investors in the United States and elsewhere who have purchased affected securities.”

While the former head of the Treasury, Timothy Geithner, was known for being sceptical of the efficacy of the FTT approach, his replacement has yet to express a public opinion on the issue. However, according to polling in December on behalf of Friends of the Earth, an environment advocacy group, around 65 percent of U.S. respondents support the idea of an FTT.

And Woo points out that some 15 bills with FTT-like initiatives were proposed in the U.S. Congress last year, a spike that shows significant political interest. Although none of those bills became law, at least one will reportedly be re-tabled within the coming week, with others sure to follow.

Climate, development

Even with just 11 members, the EU FTT could bring in as much as 47 billion dollars a year. In the United States, some say such a tax could result in 50 billion dollars a year, far greater than the current yearly budget cuts being fiercely debated in Washington.

Yet even as lawmakers may become increasingly enticed by the prospect of such sums, the European Commission’s Semeta is clear that part of that money will need to be used for international, collective responsibilities.

“We should not forget that many developed countries have very high commitments in terms of financing development and climate change,” he said.

“The best solution would be the introduction of such a tax globally … and I will talk with the [Obama] administration about how we can progress in this area. Of course, I do not believe that my visit today will convince the administration to adopt this tax, but little by little we can progress on the subject.”

Non-governmental organisations across Europe welcomed the move by 11 European Union countries Tuesday to move forward with the introduction of a financial transaction tax (FTT), but they urged national governments to ensure that a part of the revenues would be allocated to development.

Calling the tax a ‘golden anniversary’ present, because it came on the 50th anniversary of French-German friendship, a coalition of more than 70 NGOs appealed to French President Francois Hollande and German Chancellor Angela Merkel to spread a “public message of solidarity outside their borders” to guarantee that the FTT would be used particularly in the fight against poverty and HIV-AIDS, and to combat climate change.

“We are happy to see that the process is moving ahead but we’re very worried that the issue of allocating part of the money to development is not going to be taken up,” said Friederike Röder, a spokesperson for anti-poverty group ONE, which was co-founded by rock musician Bono.

“What can happen is that the countries will be so pleased to see additional revenues coming in that they might use the funds for their general national budgets and not be willing to earmark any for development,” she told IPS.

So far, Hollande is the only head of state who has said the FTT will go partly for development. France and Germany spearheaded adoption of this “major milestone” for EU tax guidelines, as the European Union’s taxation commissioner Algirdas Semeta put it on Tuesday. The decision came after a meeting of the EU’s 27 finance ministers in Brussels, but France had long been pressing for the move.

Former French president Nicolas Sarkozy vowed a year ago to implement the FTT without waiting for his European or G20 partners to come on board. “If France waits for others to tax finance, then finance will never be taxed,” Sarkozy said at the time.

The country’s parliament approved the tax and it was introduced last February during the waning days of Sarkozy’s presidency, but without the development aspect. Under Sarkozy’s socialist successor Hollande, who won the presidency last May, the law was amended to allocate an unspecified percentage of the tax revenue to development aid, compared with the 50 percent that French NGOs had requested.

During his campaign, Hollande had supported the so-called Robin Hood tax, amid vows to tax the rich and to alleviate poverty. His government has now pledged that this year 60 million euros of the funds from the FTT will be assigned to development aid, a sum that may account for only about 4 percent of the revenues, according to NGOs. But once the tax is fully in place, the government is expected to allocate 10 percent of the revenues for development.

“This would happen as from 2015, and it’s still way lower than what we expected,” Röder told IPS. “But what we have to acknowledge is that the law now stipulates that a part of the revenue will go to development, which is clearly progress.”

For Germany, Merkel had said that the tax would be the “right signal to show that we have understood that financial markets have to contribute their share to the recovery of economies,” but she wanted all members of the 27-nation European Union to agree on the measure before its imposition.

However, some EU members such as the United Kingdom, which already has a stamp duty, and Sweden have remained opposed to the idea, and it was only through the EU’s “enhanced cooperation procedure” that the FTT was given the green light for 11 instead of all 27 member states. Under this procedure, a minimum of nine EU member countries are allowed to establish integration or cooperation if they wish, without the others being involved.

The 11 nations backing the tax are Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. A 12th country is expected to join the group, according to sources in Brussels.

The measure will go now go before the European Parliament as a formality, to approve the European Commission’s proposal that transactions in shares and bonds be taxed at 0.1 percent, and trades in derivatives at 0.01 percent.

Overall, by implementing a levy of this percentage on financial transactions, France could gain up to 12 billion euros a year, according to the International Monetary Fund. At the European level, about 50 billion euros could be raised annually, the IMF says.

Some EU governments may consider using FTT revenues to support the banking industry, but several NGOs said that banks have continued to make profits despite being the main cause of the euro zone’s ongoing economic crisis. Governments in Spain, Greece and several other countries have had to prop up banks that were floundering after bad investments.

“The European FTT is a major step forward, but the main aim of this tax should be the fight against hunger, poverty, pandemics and climate change,” said Alexandre Naulot of Oxfam France. “A joint announcement by François Hollande and Angela Merkel would complete a constructive European approach in these times of crisis and budget cuts.”

Meanwhile, Khalil Elouardighi, chief campaigner for Coalition PLUS, a group of organisations that work to combat HIV/AIDS, told IPS: “If European leaders see the tax only as a way to plug their immediate budget problems as opposed to a once-in-a-century opportunity to finally finance those global challenges that are a huge threat to everybody, that would be a complete mistake.”

The group says that the financial transaction tax in France alone could help to treat an additional 400,000 people living with HIV/AIDS in the developing world, and there would still be “money left over” for many other problems. (END)

On Friday, 62 civil-society organisations charged the U.S. State Department with spreading “misinformation” regarding the feasibility of levying a small tax on stock sales and other financial transactions, revenues from which could be used for national and international public goods.

Referring to a July meeting of the United Nations that discussed long-term financing options to help countries deal with the effects of climate change, a letter sent Friday to U.S. Secretary of State Hillary Clinton accuses a member of the U.S. negotiating team of “misstatements”. The letter requests that the U.S. government “not discourage other countries from supporting this tax”.

Calls for such a levy, known as a financial transaction tax (FTT, also called a Robin Hood tax), have been gaining strength in the United States and abroad in recent months. Proponents suggest that such an approach could not only raise hundreds of billions of dollars for use in mass-scale efforts towards health, education or climate change, but could also cut down on the type of computerised high-speed trading that facilitates damaging commodities speculation.

The letter comes just ahead of a follow-up to the July meeting, which next week will again discuss potential ways to fund the estimated hundred-billion-dollar-a-year effort to mitigate and prepare for the effects of climate change. The talks are meant to lead to a report that will guide the U.N.’s thinking on the issue of climate finance.

“We firmly believe it is past time for the financial sector to pay its fair share of taxes, and for the government of the United States to support (a) modest imposition on financiers and multinational corporations in order to meet the needs of ordinary people,” the letter, signed by dozens of environment, aid, development and social-justice organisations, stated.

“At a time when public funds are deemed scarce, a (FTT) would create a new source of revenue to pay for desperately needed public goods.”

Despite earlier hopes that President Barack Obama (rumoured to support the issue) would eventually come out as a proponent of an FTT, the president has not yet spoken publicly on the issue. In August, his communications director was described in media reports as being unenthusiastic about the issue.

Growing consensus

At the July U.N. meeting, U.S. State Department official Paul Bodnar, a member of the U.S. climate negotiations team, stated, “International revenue-generation mechanisms can seem attractive because of the large sums they appear to provide, but many of them are problematic conceptually or difficult to implement in practice.”

Bodnar highlighted FTT as a specific example.

“Actually, FTT has lots of support, especially among a number of developing countries as well as some developed countries,” Karen Orenstein, with Friends of the Earth, an environment watchdog and one of the signatories of the new letter, told IPS. “So having the United States disparage this approach in an international context is not helpful, especially when it is doing so to try to discourage other countries.”

Friday’s letter accuses Bodnar of three specific misstatements: calling into question the feasibility of imposing an FTT globally; suggesting that traders would figure out how to circumvent the FTT, thus limiting its ability to raise significant revenue and even encouraging lucrative finance centres to move to other countries; and offering that the source of climate financing should be linked directly to emissions.

(By deadline, the State Department had not responded to requests for comment.)

While the third point is open to debate – the letter notes that tax revenues are not often linked directly to the source of taxation – the first two could indeed call into question the overall feasibility of an FTT.

Yet the letter, first, points out that FTTs have already been implemented in more than 30 countries, suggesting that they “do not have to be global to work”; and, second, highlights a finding by the International Monetary Fund (IMF) that FTTs “do not automatically drive out financial activity to an unacceptable extent”.

Indeed, IMF Managing Director Christine Lagarde has publicly stated, “I persist in thinking we should explore this idea and examine how realistic and how feasible it is and do this on an international basis.”

Lagarde is joined by a rising chorus of economists, activists, development experts and even high-finance luminaries in support of the idea.

In mid-September, a new bill was introduced in the U.S. House of Representatives that would place miniscule taxes on transactions involving stocks, bonds and derivatives, revenues from which would be put in part towards deficit reduction, global health, climate change and social safety nets. The bill’s author estimates that the tax would raise around 350 billion dollars a year.

On Thursday, the United States’ widest-circulation and most mainstream newspaper, USA Today, even threw its support behind an FTT, noting that “Slap(ping) a small transaction tax on rapid trades … would be a big win for small investors, and the only people harmed would be those now putting everyone else at risk.”

E.U. lead

With Washington today overwhelmed by the final weeks of a tight presidential election, pro-FTT momentum is currently coming from within the European Union. On Friday, the finance ministers of France and Germany formally requested approval to allow nine EU countries to move forward with imposing an FTT.

An earlier attempt to push through an EU-wide FTT failed amidst strong pushback from certain members, but could now proceed in this smaller arrangement.

On Wednesday, French President Francois Hollande told the U.N. General Assembly in New York, “Today we need to … introduce a tax on financial transactions – that has already been agreed to by several European states – so that the capital movements that profit from globalisation can contribute to international development and the fight against pandemics.”

In Washington, meanwhile, current U.S. policy is traced to Treasury Secretary Timothy Geithner, the former president of the Federal Reserve Bank of New York, who has forcefully come out against the idea of an FTT. If Barack Obama wins another term in the November elections, however, Geithner has stated that he would step down from his current position.

“There’s a good chance there will be fresh thinking on FTT in the next administration,” Sarah Anderson, with the Institute for Policy Studies, a think tank here in Washington, told IPS. “Not only will there be new economic policy leaders coming in, but the international debate has changed dramatically since President Obama first took office.”

Despite the grave financial and sovereign debt crisis sweeping the region, the European Union has once again failed to reach unanimous approval of a proposition made by its executive body, the European Commission (EC), to tax financial transactions in order to reduce speculation and increase state revenues.

British and Swedish rejection of the EC proposal once again condemned the so-called Tobin tax, named after its first advocate, the late U.S. economist James Tobin, to remain a theoretical project with little hope of being enacted.

But under pressure from the French and Austrian governments, and the leading German opposition Social Democratic Party (SPD), ten EU countries agreed to consider the application of the Tobin tax starting in 2014.

The preliminary agreement was reached during a European financial summit late last month, and includes Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovenia, Spain and Cyprus, all of whom pledged to levy a small tax – between 0.01 and 0.2 percent – on all financial transactions, starting in 2014.

The government of Finland also indicated that it might approve the Tobin tax.

Years after a global financial crisis of epic proportions, and following over a decade of debate around the issue, the EU’s inability to pass a common tax on speculation shows the enourmous influence the international finance sector continues to enjoy.

James Tobin, who was honoured in 1981 with the Nobel memorial prize for economic sciences, first published his proposal for a small levy on speculative financial transactions in 1972.

In 1997, in the aftermath of the Mexican and Asian financial crises, the French Association for the Taxation of Financial Transactions and Citizens’ Action (ATTAC), rescued the Tobin tax from oblivion and put it at the top of the agenda to regulate financial markets.

Since then, the tax has been a central theme in academic and political debates, particularly in Europe, so far without any substantial success.

Cautious approval by ten European governments does not mean that the tax will actually be introduced, given that the EU process of approval is extremely cumbersome and time-consuming.

“The Tobin tax in Europe is not for tomorrow,” Margrethe Vestegar, Danish minister of finances, and head of the European council of finance ministers, said at the end of the summit late June.

If at all, the tax will not be put into practice until 2014.

Germany conflicted

Ahead of the June summit, the German SPD put forth an ultimatum: unless the German government agreed to tax financial transactions, the SPD would not approve the proposed fiscal pact – conceived by the conservative government of Angela Merkel to enforce “common” austerity measures across Europe – in parliament.

Under this pressure, the German government finally relaxed its opposition to the Tobin tax, but warned that it would take at least two years to put it into practice.

“The tax won’t be approved in this legislative period,” which ends in late 2013, German minister of finances, Wolfgang Schaeuble, said in a press conference. However, he added that the German government has already budgeted for two billion euros in expected revenue from the Tobin tax for the fiscal year 2014.

Without the SPD support in the Bundestag, the lower house of parliament, the German government would have failed to legalise its blueprint for strict budgetary discipline that it wants to see implemented across Europe in the coming years, in a supposed effort to reduce state deficits and thus solve the sovereign debt crisis.

Failure to pass the corresponding law for the fiscal pact would have meant a tremendous setback for the ‘austerity regime’ conceived in Berlin, which the German government describes as fundamental to restore financial stability across the continent.

“We know that the approval of the Tobin tax in Europe won’t be easy,” according to Andrea Nahles, general secretary of the SPD. “But if the governments of Germany and France, the two strongest economies in the continent, cooperate on this question, they would surely convince those governments still opposing the tax.”

Several new studies suggest that the Tobin tax would not only boost economic growth in Europe, but also substantially increase state revenues.

According to a study by the German Institute for Economic Research, released earlier this month, the tax could generate some 11.2 billion euros in revenues in Germany alone. The study takes into consideration the fact that many banks and investment funds would relocate some of the taxed transactions out of the German financial market.

Another study undertaken by the renowned economists Stephany Griffith-Jones, a professor at Columbia University, and Avinash Persaud, senior fellow with the Caribbean Policy Research Institute, estimated that introducing the Tobin tax in Europe would boost gross domestic product (GDP) in the region by at least 0.25 percent annually.

“Our analysis suggests that the overall positive impact on GDP level could be even higher, as we identify a number of channels through which the tax could encourage a higher level of GDP,” the two economists noted in their paper.

Griffith-Jones told IPS that the tax “would also contribute to reducing the risk of a future crisis. When this is taken into account, you obtain a substantial positive effect on economic growth”.

Additionally, she rejected the repeated argument that such a tax would not be feasible because of evasion or due to its limited application in Europe. “In the past, the same was said about income tax, which is indeed avoided but which still raises a lot of money,” Griffith-Jones stressed.

In the study, the two economists recalled that “one of the oldest and largest financial transaction taxes successfully functions on its own without global imitation” – the so-called stamp duty reserve tax applied in Britain.

Griffith-Jones told IPS, “Since 1986, and before in other guises, the British government has unilaterally, without waiting on others, levied a tax of 0.50 percent on transactions in British equities.”

This tax raises some five billion U.S. dollars per year.

According to the EC’s estimates, released last March, total savings resulting from the introduction of the Tobin tax would amount to 81 billion euros for the period 2014-2020.

European Commissioner for financial programming and budget, Janusz Lewandoski, stressed, “The financial sector does not pay valued added tax (VAT), but has received massive support from taxpayer’s money.”

Therefore, he added, “Taxing the transactions of all financial institutions at rates as low as 0.01 percent is only fair. Furthermore, the estimated revenue that the tax would generate by 2020 can only be welcomed by cash-strapped governments across the EU.”

(END)

What if billionaires the world over are asked to shell out at least one percent of their wealth as an international tax for development?

The question arises in a new U.N. survey, which bemoans the fact that many donor nations continue to shy away from fulfilling their pledge to finance development goals by providing 0.7 percent of their Gross National Product (GNP).

“It is time to look for other ways to find resources to finance development needs and address growing global challenges, such as combating climate change,” said Rob Vos, the lead author of the report, entitled “World Economic and Social Survey 2012: In Search of New Development Finance.”

In their analysis, Vos and his colleagues suggest that a one percent tax on one billion dollars holding could help gain better results in regard to financing for internationally agreed development initiatives.

Currently, there are at least 1,225 billionaires in the world from 58 countries, according to Forbes magazine. The U.S. alone is home to more than 400.

The global survey says there is an urgent need to find new sources of support for development because many donor countries have failed to keep their promises, a situation worsened by the prolonged economic recession.

According to the U.N., there is a shortfall of 167 billion dollars in terms of Official Development Assistance, which is making it difficult for various agencies involved in achieving development goals aimed at fighting poverty, deadly diseases and climate change.

Thus, in addition to an international tax, the U.N. is proposing several other ways to tap resources that could strengthen international actions for sustainable development, such as taxes on carbon emissions, air traffic, and financial and currency transactions.

The U.N. says it wants to raise more than 400 billion dollars annually for development and global challenges such as fighting climate change. But that is an amount that is becoming increasingly hard to secure from governments.

U.N. studies show that a large number of developing countries remain far behind in terms of achieving the Millennium Development Goals, mainly because they lack financial resources and assistance from the donor nations.

Researchers say they have witnessed some success in regard to global health programmes aimed at providing immunisations, AIDS and tuberculosis treatments to millions of people in the developing world, but add that such initiatives hardly yielded any additional funding on top of traditional development assistance.

“Donor countries have fallen well short of their aid commitments and development assistance declined last year because of budget cuts, increasing the shortfall,” said Vos, adding that donors “must meet their commitments”.

Experts who carried out the survey see potential to raise over 400 billion every year by taxing carbon dioxide emissions in developed countries: a 25 dollar tax per tonne would raise an estimated 250 billion dollars per year, collected by national authorities, but earmarked for international cooperation.

The survey also recommends a tiny currency transaction tax of one half of a “basis point” (0.005 per cent) on all trading in four major currencies (the dollar, euro, yen and pound sterling), which could yield an estimated 40 billion per year for international cooperation, among other measures.

Such taxes also make “economic sense” as they help stimulate green growth and mitigate financial market instability, Vos said.

In his view, such new financing mechanisms will help donor countries overcome “their record of broken promises to their own benefit the world at large.”

“The survey provides important suggestions to generate solid financial underpinnings for the actions to be undertaken in follow up to the agreement reached at the recent United Nations Rio+20 Conference to achieve global sustainable development,” said Sha Zukang, under-secretary-general of the U.N. Department of Economic and Social Affairs.

The survey points out that the design of appropriate governance and allocation mechanisms is crucial for innovative financing to ultimately meet development needs and contribute to financing the post-2015 development agenda.

In recent years, a number of mechanisms have been developed under the rubric of innovative development finance, mostly in the field of health. The survey confirms that these mechanisms helped improve aid effectiveness and contributed to the financing of the Global Fund to Fight AIDS, Tuberculosis and Malaria.

However, according to researchers, the funds channeled through these programmes have mainly come from existing aid budgets, rather than generating additional resources. Overall, a total of 5.8 billion dollars has been channeled through these innovative mechanisms since 2006, but only a few hundred million dollars can be counted as additional to existing aid.

There is an urgent need for additional resources, and proposing an international tax for development is one of those, they said.

But whether the “billionaire’s tax” is feasible remains an open question. “We made this suggestion (but) technically it’s very difficult,” Vos told IPS.

Hundreds of nurses and protestors from other professions gathered on Friday in Chicago to call on world leaders to adopt a Robin Hood Tax on Wall Street transactions as a way to raise hundreds of billions of dollars every year to help heal the U.S. and world economies.

Protestors gather at Daley Plaza in Chicago during the National Nurses Rally on Friday. Credit: Bob Vonderau/CC by 2.0

The march is part of the Robin Hood Tax global week of action taking place from May 18 to May 22 in the wake of the G8 Summit at Camp David, which began this Friday. Activists around the world are lobbying for this global financial transactions tax, supported by a range of United Nations (U.N.) human rights experts, including Olivier De Schutter, the U.N. Special Rapporteur on the right to food, .

In the United States, unions, think tanks and groups that focus on the environment, international health, consumer protection and financial reform lobby for “Wall Street to give back to Main Street”, as a website in support of the Robin Hood Tax says. The idea of a financial transaction tax has existed since the 1930s, when leading economist John Maynard Keynes was a popular driver of the tax.

“After the bank bailout, the government now needs a lot of money to deal with a huge budget deficit and to help meet the USA’s commitments on aid and climate finance,” the website adds.

A financial transactions tax (FTT) would affect the purchase and sale of stocks, bonds, commodities, unit trusts, mutual funds and derivatives such as futures and options. The tax would generate revenues needed to pay for and protect global public goods like education, health and the environment, with a number of variations having been proposed of how high the tax should be.

One of the most prominent ideas is a tax rate of .1 percent on equities and bonds and .01 percent on derivatives.

Estimates suggest that at its lowest rate, the FTT would yield about 48 billion U.S. dollars across the group of countries known as the G20, with higher rates offering up to 250 billion U.S. dollars per year to offset the costs of the enduring economic, financial, fuel, climate and food crises.

Not only NGOs are lobbying for it, but the tax was also discussed by the heads of states at the G20 meeting in Cannes, France, in November 2011, with Germany, France, Spain, Brazil, Argentina, South Africa, Ethiopia and the African Union all pledging their support.

While German chancellor Angela Merkel in January expressed support for the FTT but wanted members of the 27-nation European Union to agree on the measure before its implementation, Sarkozy said that the French government might impose the tax without waiting for its European or G20 partners to come on board.

“If France waits for others to tax finance, then finance will never be taxed,” Sarkozy said in a speech. However, he did not ultimately implement such a tax during his presidential term, which ended this week.

With the G8 meeting held from May 18 to 19, NGOs hope for the representatives of France, Germany, Italy, Japan, the United Kingdom, the United States, Canada and Russia to discuss the issue further.

“At the G20 last November, when Bill Gates threw his weight behind the proposal, many countries announced their support. We want to see this momentum continue,” Simon Chouffot, spokesperson for the Robin Hood Tax Campaign, told IPS.

“We know the FTT is gaining huge momentum in Europe…and that Angela Merkel and Francois Hollande are driving this. Hollande has made the FTT one of his key priorities and we have heard he may raise it with Barack Obama,” Chouffot added. The tax is on the agenda for the EU’s informal summit on growth next week.

U.N. human rights experts also consider a financial transaction tax a pragmatic tool for governments to protect and uphold the human rights of their peoples.

“It is high time that governments re-examine the basic redistributive role of taxation to ensure that wealthier individuals and the financial sector contribute their fair share of the tax burden,” the U.N. Special Rapporteur on extreme poverty and human rights, Magdalena Sepúlveda, said.

“When the financial sector fails to pay its share, the rest of society must pick up the bill,” she said.

“Food prices have twice spiked dangerously over the past five years, and could easily do so again,” warned De Schutter, the U.N. Special Rapporteur on the right to food.

“The FTT will likely reduce hot capital flows that fuel speculation, drive price instability and wreak havoc on the right to food worldwide.”

(END)