STWR - Share The World's Resources

Unprecedented wealth and productive capacity are available today, more than ever before in human history. Since 1950, gross world product has multiplied seven times and product per capita nearly three times, both in real terms. Yet the global economy organises a vastly unequal division of the world's resources, promoting private consumption and accumulation over public well-being. Development aid funds have declined, urgent global projects have stalled for lack of money and worthy international organizations like the UN have fallen prey to budget caps and assessment shortfalls.

Bold and innovative steps are urgently needed to tap the world's wealth. Global taxes offer the most promising approach. International projects and organizations cannot depend solely on contributions from nation states, much less rely on private charity or business "partnerships." They must develop independent revenue sources to fund public purposes at the global level.

Taxes amounting to just 1% of world GDP would raise over $400 billion per year. Such a sum would meet many urgent needs while placing a very modest burden on the world's richest consumers.

Advocates have offered dozens of proposals for global taxes, but two have gained special attention: a tax on the carbon content of commercial fuels (often called a Carbon Tax), as a means to stop global warming, and a currency transaction tax (often referred to as a Tobin Tax), to reduce speculation and global economic instability.

Some day, an international political authority will levy global taxes, but at present a robust authority of this kind, with sufficient accountability and enforcement powers, does not exist. So initially, national governments must levy such taxes as part of an international tax agreement. Part of the funds levied will go towards global purposes, while part will be kept in the national treasury. Transition towards truly global taxation will await strengthened and democratized global institutions, sometime in the future, but today we must make a start along the road.

United Nations Secretary-General Kofi Annan this week welcomed the French Parliament’s adoption of a levy on airline tickets to help developing countries and urged others to follow this example.

The French parliament on Thursday approved a tax on air tickets that will aid developing countries, paving the way for the levy to be applied. The initiative, set to begin next July on locally issued tickets, will help improve the health sector of poor nations. The government hopes the tax will generate about EUR210 million (USD$248.2 million) a year in France to fund development aid. A spokesman for Mr. Annan called the scheme “a significant step, raising additional sources of innovative financing in support of the efforts by developing countries to reach the Millennium Development Goals.”

Known collectively as the MDGs, these time-bound targets were set at a 2000 UN Summit and aim to tackle major global ills such as poverty, illiteracy and hunger. “The Secretary-General strongly urges other countries to follow France’s lead with similar measures,” his spokesman said in a statement released in New York.

The tax - which is expected to raise 200 million euros (US$240 million) a year for AIDS and other health programmes largely directed at African states - will add between one and 40 euros to the price of tickets for flights leaving French airports, depending on the distance and class of seat. Airline industry groups opposed the measure, fearing it would add to the financial burdens on the sector and possibly lead to job losses and the idea is unpopular with airline companies already struggling to pay for soaring fuel costs.

French President Jacques Chirac has campaigned hard for an international tax on airline tickets to help fight global poverty. The government hopes that in France alone, the tax will generate EUR210 million (USD$248 million) a year. French Foreign Minister Philippe Douste-Blazy has said more than 66 countries support France's campaign. Chilean President Ricardo Lagos said in September the measure had been approved in his country and would go into effect on January 1, when a USD$2 charge would be added to tickets on all outgoing flights from Chile.

But the plan has encountered resistance in the United States, failed to win widespread backing in Europe and upset airlines, which fear higher fares will drive away passengers.

Global taxes are not a new idea. Legal scholar James Lorimer referred to the idea in his 1884 book Ultimate Problems of International Jurisprudence. Many of the most famous economists of the earlier twentieth century likewise considered it, including Alfred Marshall, John Maynard Keynes, and James Meade. Around the time of the United Nations’ founding in 1945, economists and policy makers often spoke of the need for robust international economic policy to avoid the dangers of renewed depression and war. To them, global economic management and even global wealth redistribution seemed not only desirable but a logical necessity.

In the 1950s and 1960s, global taxes receded from view, a casualty of the Cold War and fervent opposition from the United States government and many large companies. But in the 1970s the idea gained momentum again, among academics, NGOs and a few progressive governments, along with environmental concerns and the concept of a "global commons." Some economists proposed that taxes or fees on use of these resources could help manage and preserve the world’s atmosphere, land and oceans.

The year 1972 proved a watershed. The UN Conference on the Human Environment recommended that the international community consider global taxes. In the same year, economist James Tobin first proposed his global tax on currency transactions, while the Club of Rome, in its famous Limits of Growth report, discussed global taxes to fund international organizations.

In 1977 the Washington-based Brookings Institution convened a number of meetings on the subject and that same year a UN conference referred to global taxes as a possible source of revenues to combat desertification. Soon after, the United Nations Environment Programme (UNEP) published two major reports on global taxation and in 1980 the Brandt Commission issued an important, widely-read report that reviewed a number of global tax proposals. The Commission favoured taxes on international trade, and its report concluded that “a system of universal and automatic contributions would help to establish the principle of global responsibility, and would be a step toward co-management of the world economy.”

During the 1980s, nations actually established one global tax – a levy on deep seabed mining, incorporated in the UN Law of the Sea Convention. Scholars and policy advocates continued to discuss other forms of global taxes in international conferences and other forums. In 1992, Ruben Mendez of the United Nations Development Programme (UNDP) published a pioneering treatise on International Public Finance, giving prominence to tax proposals. Subsequently, a number of prestigious reform studies raised the issue as a step to strengthen global institutions.

The Commission on Global Governance (1995) proposed a tax on currency transactions, a tax on multinational corporations, and “user fees” for the global commons, including taxes on international airline tickets, ocean maritime transport and ocean, non-coastal fishing. The Dag Hammarskj Foundation report on Renewing the United Nations System (1994)ithe Independent Commission on Population and Quality of Life (1995), the Global Commission to Fund the United Nations (1995) and the South Centre report on UN reform (1996) also offered proposals and analysis on the subject. Even within the precincts of the International Monetary Fund, a serious working paper on currency transaction taxes emerged.

Several governments, including Austria and the Netherlands, studied the issue and quietly supported it. Within the UN system, UNEP organized a conference and UNDP set up a research project on global taxes, which soon resulted in an influential volume on The Tobin Tax (1996). Secretary General Boutros Boutros-Ghali gave the subject a highly visible boost in a famous speech at Oxford University (1996) and the UN Economic and Social Council held a full debate on the subject (1996).

Finance ministries in many rich countries continued to react negatively, however. Corporate executives also looked askance and conservatives in the United States Congress, led by Senator Jesse Helms, strongly objected. Many in Congress claimed global taxes threatened US sovereignty and they accused tax advocates of favouring authoritarian world government. In 1996 Congress considered a bill making payment of US dues to the United Nations conditional upon the UN abandoning efforts that “develop, advocate, promote or publicize proposals” that impose taxes or fees on US citizens. The bill eventually was signed into law on November 26, 1997.

In a period of financial crisis for the United Nations, this threat immediately stifled discussion in UN forums. UNDP quietly ended its research into the issue. Secretary General Boutros Boutros-Ghali lost his bid for a second term (December, 1996), in part for this reason. The United States also blocked European proposals for environmental taxes at the talks on global climate change. The US eventually imposed a weak alternative – an emissions trading system – in the path mark Kyoto Protocol, of December, 1997.

But Washington, like the mythical King Canute, could not hold back the tide. Interest in the subject continued to grow in every country, including the United States itself, due to emerging awareness of AIDS, global warming, and other impacts of globalization on people’s lives. Citizens increasingly understood that the agreements signed at the UN global conferences of the 1990s would remain meaningless without the large sums needed for implementation.

Well-known NGOs, like Friends of the Earth and War on Want, took up the cause. Grassroots movements sprang up and soon found broad public support. Trade unions developed a growing interest, including the worldwide Public Services International. Scholars discussed it. Conferences proliferated. Parliamentarians held hearings. Even the influential U.S. journal Foreign Affairs gave it space. Increasingly, parliaments and political leaders endorsed the idea.

The European Union has been interested in coordinated energy policies, including taxes on petroleum and even carbon taxes. For this reason, EU negotiators favoured a tax-based regime at Kyoto, rather than the emissions-trading system that ultimately emerged. Because the EU is already relatively energy efficient, globally-agreed carbon taxes would be less of a burden than in the US. In fact six European states, five of them EU members – Denmark, Finland, Germany, the Netherlands, Norway and Sweden, – have already levied energy/carbon taxes at the national level. The EU is some distance from implementing its own carbon tax, but its members, including even Britain, favour energy taxes as a path towards energy efficiency and environmental stewardship.

No mass campaign has emerged to promote a carbon tax, but the broad-based environment movement has shown considerable interest in this idea, lobbied for it and produced policy papers and proposals. Friends of the Earth, War on Want, and the Wuppertal Institute, among others, have actively promoted it. Networks of environmental groups have pressed for it at global conferences. A regular series of Global Conferences on Environmental Taxation have emerged. The OECD, UNEP, UNDP, and the Commission on Sustainable Development have all made or commissioned studies. Many scholars and environmental scientists have supported the idea, one of the most prominent being Richard Cooper, Boas Professor of International Economics at Harvard University, whose essay advocating a carbon tax appeared during 1998 in Foreign Affairs, an influential US foreign policy journal.

In a globalizing world, the United Nations and other international agencies must find substantial new funding to address emerging crises and promote global public purposes. Taxes can raise tens or even hundreds of billions of dollars annually for projects to protect the environment, measures for public health, programs to overcome poverty, and initiatives to prevent wars and civil conflicts.

Global taxes can have powerful policy steering effects. A carbon tax can reduce carbon dioxide emissions, slowing the dangerous effects of global warming. A currency transaction tax can throw “sand in the gears” of the currency trading system, reducing volatility and speculation that can harm millions of people. Other taxes can diminish pollution of the oceans or reduce the arms trade.

Global taxes can also help overcome the world’s growing inequality by systematically redistributing revenue, helping the world’s poorest people escape from poverty. Such redistribution would follow the pattern of income redistribution that national tax systems introduced nearly a century ago.

A tax amounting to just 1% of global GDP could address many of the most serious international problems and create a much more healthy, humane world for succeeding generations, while placing only a modest burden on consumers in rich countries.

As recently as the mid-1990’s, global taxes seemed a distant hope – bedevilled by technical concerns, opposed by powerful interests and blocked by an intractable United States government. But today the political balance has shifted. NGOs have built a worldwide mass movement and put global taxes on the political agenda. Politicians and governments in Europe and in major countries of the global South such as Brazil and India now back a currency transaction tax. Implementation seems a lively possibility.

Much remains to be solved, though, before governments agree to an effective international tax program. Advocates must consider how best to phase in the taxes, how to assure broad re-distribution, how to promote democratic accountability and oversight of the funds, and how to balance the demands of state sovereignty and global action. Difficult as these challenges may seem, they can and will be overcome.

Though the global tax movement has made great gains, its future is still not assured. We need bold leadership and imaginative strategy to bring global taxes – and the better world they promise – finally to reality. Algeria, Brazil, Britain, Chile and Norway have all publicly backed Chirac’s idea this week and indicated they may follow in Paris' footsteps. Mr. Annan has long advocated innovative solutions to provide financing to developing countries. Asked last year about a proposed tax to help developing countries, he noted that the idea has been around for some time and acknowledged that it faced opposition. “There are governments who see this as taxing their citizens, and they believe only they can tax their citizens,” he said. “But, the idea of finding a creative way of raising money for development and to assist the poor and to fight poverty, fight diseases and epidemics, is a real challenge and I think we need to explore all creative ways of raising funding for development.”

Sources:
UN News Centre
Global Policy Forum

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