Monitoring Policy Making at the United Nations |
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UN to Put Global Taxes Centre Stage
By Thalif Deen
Inter Press Service
July 8, 2004Despite strong reservations by the United States, Japan and Germany over proposed new global taxes, the United Nations is set to take centre-stage in the longstanding controversy over new sources of innovative funding for the world's poorer nations. ''The debate has already entered the United Nations,'' says U.N. Under-Secretary-General Jose Antonio Ocampo, head of the department of economic and social affairs (DESA). ''We have been requested to prepare a study, the results of which will be presented to the General Assembly (in September) this year,'' he told IPS.
The proposals on the table include a carbon tax on fuel use, the 'Tobin tax' on currency transactions, a levy on international sales of weapons, a global lottery and a tax on international airline travel. ''Although some key countries are very strongly opposed to these proposed global taxes,'' Ocampo said, ''a number of developed and developing countries (for example France and Brazil) are giving them careful consideration."
U.N. Secretary-General Kofi Annan has warned that unless current development assistance is doubled to 100 billion dollars annually, the world's 132 developing nations will fail to meet their Millennium Development Goals (MDGs). These goals are aimed at reducing poverty, improving education and health care, eliminating diseases, and preventing environmental degradation -- all by the 2015 deadline set by the U.N. General Assembly in 2000. ''We need action. There is an urgent need for a critical mass of new resources to deal with a wide spectrum of human hardship,'' says Annan, who strongly supports finding new sources of funding. ''One of the most innovative ideas,'' he told the U.N. Conference on Trade and Development (UNCTAD) in Brazil in June, ''is an International Financing Facility (IFF) proposed by the United Kingdom, that would 'frontload' aid to meet the MDGs.''
But the proposal for an IFF has split the 25-member European Union (EU). EU Commissioner Poul Nielson says ''a sleight of hand with the rules of public finance -- that mortgages future aid programmes -- is no substitute for the hard political task of securing and sustaining the will to provide increased aid, now and for many years to come.''
''This leads me to say that the IFF is really not the right way to go. Fighting global poverty is not something we should leave to be paid for by our children and grandchildren,'' Nielson told UNCTAD delegates. He added that international taxation offers one approach that would promise lasting resources for development, although the European Commission has not taken a view on specific proposals. But he warned that ''all of the proposals (for global taxes) have their problems."
''Given the parlous state of many of the least developed countries (LDCs), it is clear that something needs to be done to raise money to help them out of their continuing and deepening financial crisis,'' says Daphne Davies of the Brussels-based LDC Watch, a non-governmental organisation (NGO) that monitors the world's 50 poorest nations.
''There have been several proposals for global taxes, many of which fail because they are vague and difficult to implement,'' Davies told IPS. ''However, two could be particularly targeted for use within Least Developed Countries: an environment tax -- based on the 'polluter pays' principle -- and a global tax on arms sales," she said.
Many LDCs, such as the Democratic Republic of Congo (DRC) are fabulously rich in mineral wealth, Davies added. But several do not benefit from that wealth, and extracting the minerals is a major despoiler of the environment. Most LDC governments, she argued, are in a weak position to set conditions on how such activities are carried out, particularly by foreign companies. Some LDCs have also experienced vast corruption by their own governments, which have appropriated revenues earned from resource extraction.
To overcome all these problems, Davies said, NGOs from LDCs have suggested a 'polluter pays' clause for extracting natural resources. A mechanism could be set up, under the auspices of the United Nations, and overseen by the U.N. Environment Programme (UNEP), she suggested. Companies that extract natural resources would pay a percentage of the value of the wealth they earn into a fund, whose money would then be used to improve or to restore the environment in LDCs, Davies added. She said that Brazilian President Lula da Silva last year suggested a tax on arms sales. ''This type of tax would help LDCs, as civil wars and conflicts are some of the greatest causes of poverty and underdevelopment in LDCs,'' according to Davies.
The majority of these conflicts, she said, have taken place in sub-Saharan African LDCs. It was calculated that in 1999 the region spent 4.4 percent of its gross domestic product (GDP) on defence spending -- the highest rate in the world -- compared with 3.1 percent by the United States, 2.3 percent by Europe and the North Atlantic Treaty Organisation (NATO) and 3.2 percent by non-NATO Europe.
According to the Stockholm International Peace Research Institute, the worldwide value of weapons deliveries is about 32.6 billion dollars annually. The richest developed nations and the world's major powers -- including the United States, Russia, Canada, France, Italy, Japan and the United Kingdom -- account for more than 85 percent of arms sales. ''Perhaps the reason why western nations are not in favour of the (tax) idea is because it would, a) highlight the role they play in producing and selling arms to LDCs, and, b) force them to pay tax on arms sales,'' Davies added.
If just one percent of arms sales were paid each year into a global fund, administered by the United Nations, it would raise hundreds of millions of dollars. Part of that money could then be used for post-conflict rehabilitation and government building in LDCs, according to this idea. Ruby van der Wekken of the Helsinki-based Network Institute for Global Democratisation (NIGD) said that today the proposal for a tax on currency transactions (CTT) is by far the most viable suggestion of all global tax initiatives. The dual effect of this tax (decrease in speculation and more resources for democratically decided "good issues") makes it very appealing, she said.
The effort to set up the tax system would be a small price to pay to fend off the huge economic and human costs of global financial meltdown and instability, van der Wekken suggested, adding that slackening global conditions are at least partially due to the re-emergence of global financial markets. ''Once the currency transactions tax, including a democratic system of the redistribution of the income is implemented, other forms of global taxation could easily be set up,'' she told IPS. ''Although the currency transactions tax may not be realised tomorrow, we hope that we will not need another severe currency crisis before the proposal gains stronger wind under its wings,'' she added.
During the first months of 2004, including at the June UNCTAD meeting, Lula da Silva has repeatedly suggested the need for a tax on speculative financial transactions, especially those conducted in international "tax havens''. The governments of France and Chile have apparently decided to support the initiative, van der Wekken said. Asked why countries like the United States oppose it, she said both the United States and Britain rely on income that financial speculators take to London and New York. Also, as many research reports show, the beneficiaries of currency crises are often western investors, she added.
Van der Wekken warned that while it may appear to decision-makers that the U.S. dollar is difficult to speculate against, while currencies of other countries -- or smaller currency zones -- are easier targets, "we however think this is a mistake, for the U.S. dollar may also collapse."
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