Monitoring Policy Making at the United Nations |
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William Evans: "To Help the UN, A Tax on Trade" "To Help the UN, A Tax on Trade"
by William M. Evan, Professor Emeritus
"Viewpoint"
Wharton School of Business, University of Pennsylvania
New York Times
6 July 1997
For all its deficiencies and failures, the United Nations is an international institution worthy of preservation. Without it, who would condemn international aggresion and violations of human rights, send peacekeepers to maintain cease-fires, or help refugees from war-torn countries? Who would prosecute war criminals, fight infectious diseases that have global epidemic potential or promote economic development in third world countries?Bu the future of the United Nations has been bleak for a while now, largely because of the failure of member states to pay their annual dues, with the United States being the most egregious delinquent. Secretary General Kofi Annan plans to streamline the organization's budget and bureaucracy in order to persuade these countries to pay up. But if he fails, the United Nations could face financial collapse.
Over the last few months, Congress and the Administration have finally been addressing the issue in the United States. But American action would be only a first step to rebuilding the financial strength of the United Nations.
To make the United Nations solvent again, I propose levying a tax on international trade.
Currently, 70 of the 185 member states of the United Nations owe a total of $3.5 billion in back dues and assessments for peacekeeping operations. Of that, the United States owes $1.3 billion; Russia is close behind at $1 billion.
The magnitude of the problem is evident when one recognizes that the United Nations operates on an annual budget of only about $1.25 billion. This is much less than the budgets of major cities like London and New York and is even less than the budget of major research universities like Harvard and Pennsylvania.
A rational system for financing, however, can be found in a very logical place: international trade. After all, the United Nations keeps the world's doors open to trade as it pursues its primary mandate -- maintaining world peace. It could thus justify a tax on all exported merchandise and services from member states.
To determine the approximate tax rate needed to meet the $1.25 billion budget, I applied several hypothetical tax rates to the export figures of four developed and five less-developed countries combined for 1995, using the latest available export data of the International Monetary Fund. I found that a tax rate as small as three hundredths of 1 percent would generate slightly more than $1.25 billion, more than covering the budget.
Such a tax would be collected by member states from their domiciled corporations that are engaged in international trade. The tax would need the approval of the United Nations General Assembly and possibly of its Security Council. And it would very likely elicit substantial opposition, especially from countries with strong exports. But the proposal is fair, in that it allows members states to share the cost burden with the private-sector beneficiaries of trade.
This tax should enhance, not replace, the system of dues assessment. Let every delinquent member pay up, then keep making its contribution. With the tax in place, however, dues could be adjusted periodically, depending on the revenue. Together, the two sources of revenue could provide a sound financial basis for the United Nations as it prepares to meet its global tasks in the new millenium.
Nation Exports
($US billions)Tax Revenue
($US Millions)United States $584.7 $175.4 Japan $443.1 $132.9 France $266.7 $86.0 Russia $79.0 $23.7 China $148.8 $48.6 Nigeria $34.2 $10.8 India $30.5 $9.6 South Africa $27.5 $8.4 Syria $4.0 $1.2 All Other Nations $3,385.0 $1,015.5 Total Tax Revenue $1,507.1
Correction: The above article is of considerable interest to GPF visitors, but it contains serious errors of fact that we wish to correct. The outstanding debts to the UN at the time of publication were $2.366 billion, not $3.5 billion as the author states. Further, the debts of the United States were $1.469 billion, not $1.3 billion as the author states. And finally, Russia is not "close behind at $1 billion" but rather in third position at $237 million (second place is Ukraine with $248 million). Though these are serious errors, they do not take away from the argument about the trade tax, which is fundamentally sound.
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