Global Policy Forum

International Taxation


The Trajectory of an Idea from Lorimer to Brandt

By Myron J. Frankman

World Development 24
May 1996, 2000


This paper examines early proposals for the establishment of international taxes for the support of international organization, for the maintenance of international order, and/or for development. The writings examined span close to one century starting with James Lorimer in 1884 and concluding with the report of the Brandt Commission in 1980. Our focus is on works, mainly written since 1940, which have explored the possibility of taxation levied on income and transactions of individuals and firms, rather than on the financing of aid and international organization by national governments, which may be thought of as equivalent to taxation.

International Taxation: The Trajectory of an Idea from Lorimer to Brandt

Income is presently redistributed internationally in a myriad of ways. It is redistributed through each change in the terms of trade, through the pricing policies of multinational corporations, through the action of cartels, through changes in the London Interbank Offer Rate, through nationalization of assets, and, rather minimally by comparison, through foreign aid programs. The taxes, subsidies, and quantitative restrictions on trade imposed by individual national governments also have widespread distributional consequences in the world economy. Income is not redistributed internationally in a systematic, predictable, progressive way at present. The increasing calls during the 1980s for "adjustment with a human face" may be offered as prima facie support for the contention that on balance the transactions of private and public actors have not favored global equity. Mechanisms have long been in place at the national level to offset in some measure the continuous process of transaction-based income redistribution. At the global level, discussion of an organized system of redistribution has not yet made its way to the negotiating table in any meaningful sense.

The focus in this paper is on the intellectual groundwork on the taxation side for global public finance. Consistent with the works of those have contributed to this topic (which up to 1980 had barely gathered sufficient momentum to be qualified as a debate), our concern here will be with international taxation as both a means for facilitating redistributional measures to close the gap between North and South and for financing the organizational infrastructure necessary for the extension of global order. Writings on international taxation frequently take up both objectives. The clear presumption is that the maintenance of international stability and the extension in the provision of international public goods (stability itself being one) are in the common interest and are two complementary purposes of global public finance. My emphasis here is almost exclusively on raising revenue through taxation; expenditure considerations and non-tax means (commodity price stabilization and seignior age associated with SDR creation, for example) of funding are not addressed in detail.

I cannot pretend that this is an exhaustive survey. By today's criterion of citation counts, most of the contributions to the discussion have been like the proverbial trees falling in the forest where no one is present to hear. I have been told that one writer or another has contributed to the discussion, only to find after an exhaustive search, that his/her discussion of international taxation was limited to one or two paragraphs. After a brief discussion of writers who may be considered to be precursors, I shall trace the idea of international taxation from the work of James Lorimer in 1884, the earliest detailed discussion which I encountered, to the 1980 report of the Independent Commission on International Development, known as the Brandt Commission. While serious discussion of international taxation still has not reached the political agenda, it is an idea that has been spoken of with moderately increasing frequency since the publication of the Brandt and Brundtland Reports.

Early Contributions

The search for distant glimmerings which are consistent with the ideas of international taxation and income redistribution, if not actually explicit, takes one back at least to the mid-eighteenth century writing of David Hume, where a clear statement of a country's interests in the well-being of its neighbors can be found:

I will venture to assert, that the increase of riches and commerce in any one nation, instead of hurting, commonly promotes the riches and commerce of all its neighbors; and that a state can scarcely carry its trade and industry very far, where all the surrounding states are buried in ignorance, sloth, and barbarism. . .

I shall therefore venture to acknowledge, that, not only as a man, but as a BRITISH subject, I pray for the flourishing commerce of GERMANY, SPAIN, ITALY, and even FRANCE itself.

Hume's view represents a broader formulation than that of mutual gains through trade based on either of the later notions of absolute or comparative advantage. Hume's assertion has far-reaching implications. It is but a logical step, albeit a giant one, to taking action intended to assist one's neighbors. Hume's approach is consistent with the idea of international that the promotion of growth in one country can through external trade generate growth in others.

Almost one century later John Stuart Mill argued that the production problem had been solved, at least in the advanced countries, and that the time had come to focus on distribution: "It is only in the backward countries of the world that increased production is still an important object: in those most advanced, what is economically needed is a better distribution . . ." Mill, however, does not extend his discussion to international taxation and redistribution.

One of the earliest explicit references to international taxation appears in James Lorimer's Ultimate Problem of International Jurisprudence, published in 1884. For Lorimer the "ultimate problem" is "how to find international equivalents for the factors known to national law as legislation, jurisdiction, and execution?" In sketching out his detailed answers to the question, Lorimer does not neglect finances:

The expenses of the International Government shall be defrayed by an international tax, to be levied by the government of each State upon its citizens; and the extent of such tax shall be proportioned to the number of representatives which the State sends to the International Legislature.

In the two decades immediately preceding work, the organizations that were to become the International Telecommunication Union and the Universal Postal Union had been established, in 1865 and 1874 respectively. They were financed through membership assessments roughly keyed to benefits received. If one sees membership fees, whatever the basis of assessment, as a form of taxation, then we have in these organizations the first beginnings on a most uncertain road to global taxation.

There may well have been other proposals beside in the ensuing decades, but they would appear to have been consigned to oblivion, scarcely meriting even a footnote. In his survey of the history of the idea of economic development, for example, H.W. Arndt is able to find but one early passing reference, that being in Marshall's 1919 Industry and Trade, where he speaks of the eventual time when redistribution will move from being a national obligation to a cosmopolitan one.

During the First World War and the early interior years attention turned to the establishment and operation of the League of Nations. A search for references to international taxation in these writings is largely fruitless. The presumption appeared to have been that the institutions had to be shaped before one could concern oneself with the specifics of international public finance. The central concern of many of the writers of the time was, understandably, the prevention of armed conflict.

The Covenant of the League called for financing based on the benefits received approach used by the Universal Postal Union. This appeared inappropriate almost from the outset and a shift was made to a system approximating ability to pay based on an index combining government revenues and population, with the population of the largest European member as the upper limit, to prevent an undue burden on India and China.

Building a Stable Future

A flurry of writing on international institution building occurred during the Second World War when considerable intellectual effort was turned to the question of organizing for world peace. Much of this thinking started from the premise that the economic policies which led to and prolonged the Great Depression contributed directly to the war. The hope was that with stronger central mechanisms a renewed outbreak of the beggar-the-neighbor policies of the 1930s could be prevented.

Hans Singer has captured the spirit of the times in his reflections on his wartime and early postwar experience: "Obviously, a partisan of the social welfare state would be attracted by the thought and possibilities of a global welfare state represented by the United Nations in those hopeful first days of naive utopianism." This hopefulness was fed by early official statements, most notably the Atlantic Charter of August 1941 signed by Wins ton Churchill and Franklin Roosevelt, in which they pledged that their governments:

desired to bring about the fullest collaboration among nations in obtaining for all improved labor standards, economic development and social security; and that they hoped to establish a peace that would enable all men to live out their lives in freedom from fear and want.

James Meade was one of the early wartime contributors to the discussion. Meade anticipated some form of "International Organization" to be in existence at the end of the war. Success of such an enterprise required that Member States "restrict their freedom of action in the economic sphere and grant corresponding powers of economic decision to the appropriate organs of the International Organization." As the International Organization was to have as an objective promotion of human welfare and raising the standard of living, it would need adequate financing at its disposal:

If the functions of the International Authority are at all extensive, it will need a relatively large revenue; and the raising of this revenue, whether it be effected by means of taxation imposed by the International Authority directly or by means of contributions from the governments of the Member States, will involve the question of assessing the burden as between rich and poor states. The raising of such a revenue will give rise immediately to the possibility of reducing the inequalities of income as between the various Member States by a system of progressive taxation or state contributions which imposes the largest per capita burden on the Member States with the highest per capita real income. . . .

In addition to the use of progressive taxes or state contributions to the International Authority as a means of reducing such inequalities, the expenditure of its revenue by the International Authority might be used for the same purpose.

In a later work, Meade provided theoretical support for international taxation by dropping the customary assumption of economists that interpersonal comparisons of utility can not be made. By making recourse to cardinal utility, Meade demonstrated that it may be possible to maximize world welfare through the subsidization of loser nations by the gainers from trade intervention. Meade, in keeping with the extreme brevity of the treatise of economic geometry in which this appears, states in the very last clause of the work: "we should strive . . . to arrange for direct international transfers of income from those to whom income means little to those to whom income means much."

C. Wilfred Jenks also addressed the question of the financing of international institutions during the war years. In his detailed discussion, Jenks pointed to the significance of financial relationships between federal authorities and the federated units in all the major federations. He observed that most international lawyers have tended not to address the issue, as they regarded financial matters outside their range of expertise. In Jenks' view it was imperative to prevent a recurrence of the relative penury which prevented international organizations during the inter-war period from dealing adequately with economic and social problems. First on his list of suggestions requiring attention from politicians and financial experts is the following:

The possibility of singling out distinctive sources of revenue which it would be practicable to make independent of national control and to assign to world bodies for the financing of their work. In this connection special consideration should be given to the possibility of an international tax upon any profits accruing from the operations of an international bank, international development corporations, international airways, canals and other means of communication, and internationally controlled monopolies administered as world public services.

Jenks was concerned that the sources of revenue yield a sufficient income that would be assured to increase with the passage of time. In 1946 T. A. Sumberg made similar observations:

Economists could locate the most suitable international revenue sources among the items conventionally included in a nation's balance of payments: merchandise trade, the sales of services (shipping, tourist, and others), investment returns, and immigrant remittances.

It is worth noting that both Jenks and Sumberg focused on the taxation of activities which were dependent on the existence of international order. In effect. those who derive the greatest benefit from the international order should reasonably be expected to contribute to its perpetuation and extension.

Jan Tinbergen, as early as 1945, had spoken of the appropriate level for government action, judging that ". . . curtailment of national sovereignty with regard to economic policy" is required "if a more stable and prosperous social system is to be realized in the world . . ." Tinbergen spoke in 1945 about "a distribution as just as possible among l. persons and classes, and 2. nations" as being one of the aims of international economic relations. In what might be termed a "World Peace through World Economy" approach, Tinbergen observed that the aims of "as few conflicts as possible, both at home and abroad" and "as much freedom as possible for the parts" would likely be met to the extent that distribution is just and production as large and as stable as possible. Tinbergen later suggested that an international "agency supervising the main features of public finance, with the power to prescribe their inflationary or deflationary gap would seem the minimum which from the purely economic view-point would be desirable." By 1959 Tinbergen's notion of a supervisory agency had changed to an International Treasury able to either subsidize or terminate subsidies.

One can't think of the war years without thinking of the most prolific contributor to the debates on the economic shape of the postwar world: John Maynard Keynes. In Keynes' proposal for an International Clearing Union one finds a brief reference to international taxes to be levied on balance of payments surpluses, rather than on transactions or national income as is common in most other proposals. In his discussion of the use of the Clearing Union for other international purposes, Keynes suggests "the Union might become the pivot of the future economic government of the world." He envisioned the Union possibly establishing "a clearing account in favour of international bodies charged with post-war relief, rehabilitation and reconstruction" which might be financed by a tax on surplus credit balances. Keynes also envisioned a one-time transfer to help jump start the postwar economy:

We need an agreed plan for starting off every country after the war with a stock of reserves appropriate to its importance in world commerce, so that without due anxiety it can set its house in order during the transitional period to full peace-time conditions.

While these far-reaching ideas were not embodied in the international arrangements that emerged from the Second World War, we do find in the financing of the United Nations a shift from the principle of "ability to pay" eventually adopted by the League of Nations to "capacity to pay". This is reflected in a financing formula which endeavors to take account of differences in per capita income in arriving at national assessments.

The advent of the Cold War and the anti-Communist witch-hunt in the United States cast a chill over thought and action . The ink on the San Francisco charter of the United Nations was barely dry, when "one-worldism" fell into extreme disfavor in the United States. It is useful to recall that even Harry Dexter White, the American architect of the International Monetary Fund was one of the early targets of the inquisition conducted by US House Un-American Activities Committee.

These were years in America when ideas even slightly at variance with the standard line were best kept to oneself. Nor was there much room for generosity left after the Marshall Plan. Hans Singer observes that even support for soft loans was regarded at the time as subversive: "Those advocating soft aid for developing countries, specially when suggesting this be done under U.N. auspices, were often treated as outcasts and out to weaken the Free World." This view clearly reflects the length of the struggle for multilateral soft funding for developing countries, which culminated in 1960 in the creation of the International Development Association (IDA) under the wing of the World Bank, rather than a proposed UN Special Fund for Economic Development (SUNFED).

Burden Sharing and Foreign Aid

The post-war growth of international organization and of various forms of international cooperation, including collective security arrangements, led to work evaluating the relative sharing of the financial burden by the relatively small number of national governments which were the main funding sources in the 1950s and 1960s. Thomas Schelling (1955), Paul Rosenstein-Rodan (1961), Irving Kravis and Michael Davenport (1963) and John Pincus (1965), in examining the distribution of burden, were all led to draw comparisons with individual taxation.

In addressing the question of burden-sharing, Schelling draws a comparison between the financing of the League of Nations and the United Nations. While regarding the UN's use of per capita income as a distinct advance over the League's essentially regressive assessment method, Schelling saw an important remaining anomaly: "Does a contribution schedule that relies on per capita income lead to a distribution that is consistent with progressive individual taxation?" The inability to provide an affirmative answer to this question led him to conclude:

The whole rationale for computing assessments on an individual basis disappears if governments tax on some other basis. In fact, it is not even certain that any improvement results from calculating country assessments in this fashion as compared with the use of a national average.

If one's concern is equity, then an individual international tax would have to be complemented with some degree of harmonization of national tax structures. While these are important considerations, Schelling noted that any actual tax structure is not a "logical quantitative answer," but rather "a negotiated compromise".

In his 1961 proposal for international aid, Paul Rosenstein-Rodan dealt in detail with both the revenue and expenditure sides of aid, emphasizing concessional loans rather than transfers. On the revenue side, he invoked the national analogy in developing his argument for the application of the progressive income tax principle to the real GNP of the rich countries: "General principles of how the burden of international aid should be divided among developed countries have not yet been agreed upon. The social philosophy of the free world provides nonetheless some clear indications." Rosenstein-Rodan is among the few who have seen foreign aid as a tax, a perspective which alters the nature of the discourse: "If aid to developing countries is an income tax, the use of the tax should be decided by a consensus of all the parties." Consistent with his emphasis on consensus, he calls for the creation of an International Court of Economic Justice and bemoans the international separation of finance and democracy.

The theme of burden sharing and international income taxation are pursued by Irving Kravis and Michael Davenport, who explore the implications of relative sharing of costs of international activities on an ability to pay basis. They observe that if "contributions were strictly proportional to real national income, it would not matter whether nations or individuals were regarded as the taxable unit in burden-sharing exercises." They argue, however, both for progressivity and individual income taxation:

For the world as a whole, however, the distribution of income between countries is less equal that the distribution within countries, and if the choice for progressivity made by the people of the individual countries is not irrational there appears to be a case for progressivity in international burden-sharing.

. . . the logical conclusion of the process of integration is not a world community composed of nations, but a world community composed of individuals. Therefore, it may be argued, the burden of international activities undertaken for the common welfare should eventually depend upon individual capacities to pay rather than upon the capacities of nations to pay.

Pincus extended the work and calculations of Rosenstein-Rodan and Kravis and Davenport and reached some similar conclusions: that equity among countries is "an odd sort of equity," quite distinct from equity among individuals and that "whatever international assessment scheme is used, it implies no specific tax incidence domestically."

The writings on foreign aid have been numerous, while those on international taxation and international income redistribution have been few. Moreover, they appear to be two separate sets of discourse, with virtually no overlap. Writers on foreign aid have not embraced the viewpoint that predominates in the writings on international taxation. There are an elaborate set of issues in the foreign aid literature -- project vs. program aid, grant equivalents, bilateral vs. multilateral aid, aid effectiveness -- which tend to shift attention away from the broader issues addressed in this paper.

Few authors have chosen to draw the parallel between income redistribution programs within a nation state and foreign aid. This comparison is largely absent from the foreign assistance literature, which generally fails to see aid as a step toward a permanent system of international transfers, in which today's donor countries might well become tomorrow's net recipients. The foreign aid writings of the post World War II period are near unanimous in regarding aid as a self-limiting activity tied in with the transition of a country from the category of less developed to that of developed. Few writers have seen the oft-repeated call for the voluntary commitment of 0.7 percent of gross national product to official development assistance as a precursor to international income taxation. That would appear to have been Harry Johnson's response to the recommended aid target goal and the shift to preponderant channeling of ODA through multilateral institutions proposed by the Pearson Commission on International Development (1969):

they have reciprocated by promoting the World Bank into a major institution of world government. . . . But it all depends on the citizenry of the rich nations accepting the commitment to move towards a world fiscal system of income redistribution by accepting much enlarged contributions by their governments to development assistance.

Nowhere is there an explicit mention in the Pearson Report to either international taxation or redistribution. Was Harry Johnson, ever wary, responding to what appeared to be a foot in the door? As Evan Luard, ever hopeful, has observed: "The gradual accretion of power and responsibility in areas where the benefits of international action are universally accorded may lead eventually to semi-independent action in these fields." Later William Cline spoke of the 0.7 percent of GNP target as having "acquired a certain moral force. Its analogue is the domestic income tax . . . In principle, an aid target should represent a . . . mutually agreed commitment for international public purposes."

Dudley Seers added his voice in 1964 in an article which was concerned more with convincingly affirming the case for international taxation, rather than selling a particular set of taxes. Seers briefly referred to the possibility of either assessing governments, creating supplements on national taxes and/or levying special international taxes. He called for the creation of a Commission on World Income Distribution to help shape public opinion and, in view of the difficulties of mobilizing public support, he saw the necessity for earmarking the revenues for the achievement of world targets for social conditions. Seers acknowledged that such thinking still seemed Utopian in the 1960s, but drew a parallel with the unification of Germany in the 19th century: ". . . the elimination of the economic sovereignty of the separate principalities changed quite quickly from the unthinkable to the inevitable."

One proposal that explicitly envisioned a link between the personal income tax and the financing of aid was formulated by Albert Hirschman and Richard Bird They called for tax credits to individuals for contributions to foreign aid. While they spoke of the need for major departures, this would not appear to be it. Moreover, their proposal involved completely bypassing existing international organizations. In a full discussion of the limitations of trying to use private contributions as a key element in financing the United Nations system, which had already appeared three years earlier, the point was made that in the 1960s few countries allowed tax exemptions for any personal charitable contributions. In any event, their modest proposal received little notice and passed, along with so many others, into intellectual limbo.

In law and political science work proceeded on the financing of world order. The most noted of these is part of a highly detailed "Proposed Revised Charter of the United Nations" drafted in 1958 by Grenville Clark and Louis B. Sohn. They proposed the creation of a World Development Authority directed by a five person World Development Council. The Authority would channel "grants-in-aid or interest-free loans" to developing countries for indispensable economic and social projects for which adequate financing is not otherwise available. The Authority would be funded out of the general budget of the United Nations, which in their plan would be obtained through taxes earmarked by each member state for the UN. They call for each country to designate for the UN all or part of existing domestic excise, income, export, and/or import taxes up to a national limit of 2.5 percent of gross product and a world limit of 2.0 percent of estimated gross world product. They emphasized the need for large and reliable revenues for the United Nations and, in turn, for development and noted that the national burden would be relatively light once disarmament is achieved.

Taxes on beneficiaries of the existence of international order were proposed about the same time by the Commission to Study the Organization of Peace: it proposed in 1964 that the UN receive a small part of the fees for international mail, passports and visas as well as of tolls levied upon international waterways. It also proposed that the UN have either "taxation powers or property rights over the actual and potential resources of the sea bed, Antarctica, and outer space."

Further discussion of new revenue sources for the United Nations system are contained in a 1964 volume written by John Stoessinger and his associates. Their survey ranges from the sale of postage stamps and greeting cards to a proposal for an international joint stock Cosmic Development Corporation to exploit the resources of outer space. Their main conclusions can be summarized as follows:

1. As a general rule, if a resource promises to yield revenue, states will tend to claim it. If they do not, it usually means that the resource is not only currently, but also potentially, useless.

2. . . . the resources of the frozen polar zones, of the oceans, and of outer space will not become substitutes for the failure of states to meet their financial obligations to the United Nations.

The 1970s: The Common Heritage and the NIEO

In the 1970s talk of international tax schemes began to be heard with increasing frequency. One impetus to this was the inclusion of the principle of the "Common Heritage of Mankind" by the United Nations General Assembly in 1967 in the first Treaty on Outer Space and in 1970 as a basis for the Law of the Sea Conference. The other major impetus was provided by the passage in 1974 of the UN resolution calling for a New International Economic Order (NIEO).

The "common heritage of mankind" was used in the discussion of global sharing of the proceeds from the economic exploitation of regions that are not part of the territory of any sovereign state (res nullius). Yet in the very forum in which the principle of a common heritage was being frequently invoked, a great sea grab took place assigning resources not in proportion to need, but rather in proportion to length of coastline and the richness of the resources located there. As William Cline has pointed out, the creation of exclusive economic zones represented yet another extension of property rights, quite inconsistent with the notion of the common heritage. As long as one's thinking about our common heritage is limited to what is no country's land, then that which is left as our common heritage is what little remains after all else is appropriated. Of course, property rights themselves are part of our common heritage. The historical accident of national boundaries should not justify denying to the bulk of the world's population a share in the monetary gains resulting from the harnessing of our common heritage.

In the mid-1970s we find a suggestion from Tinbergen for an even broader application of the common heritage concept "to new domains such as mineral rights, science and technology, means of production and other sources of wealth." A moment's reflection would tell us that virtually the entire world we live in today is based on a common heritage: written and spoken language, the food we eat, the clothes we wear, the very thoughts we think, not to mention the technological building blocks in the machines that surround us. International public goods, including peace, are also part of our common heritage.

In terms of the present discussion, an important point to note is that an open-ended interpretation of the common heritage of mankind can be invoked to provide philosophical underpinning for the case for international taxation to finance both global income redistribution and the maintenance of international order.

In a 1975 follow-up to the original NIEO resolution, the General Assembly passed a resolution which spelled out measures to serve as a framework for UN initiatives in support of the NIEO. That document included a request for "consideration of other means of transfer of real resources which are predictable, assured and continuous." Nonetheless, the framework resolution made no explicit reference to international taxation and reiterated the desirability of voluntarily attaining the concessional aid target of 0.7 percent of GNP.

One tax which could have met the criteria of the 1975 resolution was described in 1970 in the report of a United Nations committee headed by Tinbergen. It proposed that an 0.5 per cent tax on the value of selected consumer durables be levied to increase the funds available for development finance. This tax was to be referred to as a "world solidarity contribution". One cannot help but wonder whether payment of a tax that discriminates between different types of transactions is likely to extend one's sense of community to include the poor of the world. That consciousness must spring from other sources. As Tinbergen himself has instructed us on the design of economic policy, different targets (in this case solidarity and revenue) require different instruments.

In a 1976 study for the Club of Rome coordinated by Tinbergen, Mahbub ul Haq and James Grant enumerated taxes which might be considered in order to increase the amount and automaticity of funds available for development and international income redistribution:

tax on non-renewable resources, tax on international pollutants, tax on activities of transnational enterprises, rebates to countries of origin of taxes collected on the earnings of trained immigrants from Third World countries, taxes on or royalties from commercial activities arising out of international commons -- e.g. ocean beds, outer space, the Antarctic region; and various proposals for taxing international civil servants, consumer spending and armament spending.

Haq, in a separate study, which appeared the same year, discussed some of these taxes in greater detail and expressed his preference for an international income tax. He admitted that an income tax would pose the greatest challenge to national sovereignty and hence must be deferred until the time is propitious in favor of devices for taxing income indirectly. Haq also singled out what he termed anti-humanitarian activities for taxation and included a ten percent tax on arms expenditures. In his discussion of international pollution, Haq drew the parallel with principles that are accepted at the national level:

Whenever social diseconomies result on an international scale from the action of sovereign states, the United Nations should have the authority to impose a tax on such activities on behalf of the entire international community. The principle is a simple one. Its acceptance will require a revolution in mankind's thinking.

Various writers, led by a consideration of spillovers, have toyed with the idea of international income taxation. Edith Penrose was drawn inexorably by her work on multinational corporations to propose an international corporate income tax which would be levied on firms subject to a newly created status of international incorporation. The resulting revenues were to be allocated according to a formula among the countries in which each firm operated, rather than being available for such global purposes as deemed appropriate.

Steinberg, Yager, and Brannon (1978) dealt at length with alternate forms of global taxation and included estimates of potential revenues. Their work was originally prepared as a background document for a 1977 conference at Bellagio on New Means of Financing International Needs. They proposed a national "shadow tax" (i.e., a payment required on the basis of estimated yields, as opposed to an actual levy imposed by the United Nations) to be calculated on the GNP of nation states; an arrangement which would convert the 0.7 per cent concessional aid target into a formal obligation. They observed that shadow taxes not only would be a different way of establishing the obligation of countries to international organizations, but if substituted for existing assessments would not require any new formal international agreements. The other sources of general revenue which they regarded as most promising were the economic rents from deep-seabed mineral extraction and taxes on international trade and the international transfer of profits from international investments.

William Cline also addressed international taxes in a 1979 discussion of resource transfers to LDCs. He discussed revenues from ocean resources (which would likely be limited given the recognition of exclusive economic zones), taxes on fisheries which would have the dual function of reducing overexploitation, remittance of tariffs on LDC products collected by industrial countries and brain drain taxes. He concluded that, on efficiency grounds, these potential automatic sources would be inferior to untied, multilateral aid programs. Nonetheless, given the lack of political will, he conceded that "new mechanisms such as these warrant consideration to the extent that they could more easily obtain donor support than outright aid."

What has come to be known as the Tobin Tax on foreign exchange transactions originally appeared in a lecture presented by James Tobin in 1972 and was developed more fully by him in 1978. Tobin's proposal for a tax on foreign exchange transactions was motivated by a desire to dampen speculative capital flows and to restore greater autonomy to national monetary policy. As Tobin's concern was to mitigate the "predominance of speculation over enterprise", he expressed no interest in the disposition of the vast sums likely to be raised by an internationally uniform tax. He merely indicated that the proceeds collected by individual governments be paid into the IMF or the World Bank. Given the recent interest in the Tobin Tax, it is appropriate to remind the reader that he offered it "regretfully" as a second best. The first best solution being "a common currency, common monetary and fiscal policy, and economic integration."

Sunshine and Chaudhri (1981) discuss many of the same taxes as are considered by Steinberg, Yager, and Brannon. Their article is a useful complement in that the emphasis is on the legal dimension and makes reference to existing precedents. Sunshine and Chaudhri envision, as do some others, that the funds raised through global development taxes would supplement, rather than replace, the components of current resource transfers. In common with other schemes, their transaction-based taxes would be paid by nationals of all countries, developed and developing. Their exclusive emphasis on taxes for development stands in contrast to the work of Jenks, Sumberg, and Clark and Sohn who saw development as but one of the international needs requiring finance and not the sole purpose.

In the 1980 Brandt Commission Report we also find a listing of a series of international taxes. The taxes mentioned would have been familiar to anyone following this literature at the time. The uniqueness of the Brandt Commission approach is the insistence on universality of any revenue-raising program, no matter how modest at first, as being essential in the forging of global solidarity:

We believe that a system of universal and automatic contributions would help to establish the principle of global responsibility, and would be a step towards comanagement of the world economy.

I have chosen the Brandt Report to conclude this largely chronological survey not because of the originality of the international tax proposals presented, most of which had been discussed in detail by others previously, but because it is arguably the first source containing proposals for international taxation to have had such wide circulation and discussion. The Report was translated into over 20 languages and was the focus of many meetings, including a North-South Summit in Cancun, Mexico in 1981.


Much of the agenda of the NIEO, including consideration of a system of automatic transfers has been rudely displaced from the stage by a combination of lagging growth in the industrial countries, preoccupation with Third World debt and the seemingly bright star of "marketplace magic". The attack on the state that has characterized recent years has once again left little room for progressive taxation and redistribution at the international level. The "aid weariness" that is spoken of can be considered a logical extension of the difficulties we now encounter even in maintaining adequate welfare systems at home. The pressures of international competition are breeding a mean spirit everywhere. Paradoxically, as Gunnar Myrdal had already observed in 1960, the continued pursuit of individual national economic policies will eventually leave "no alternative to continued international economic disintegration, except to strive for a Welfare World" with international taxation and redistribution.

Against the powerful forces for allowing market solutions, we have mushrooming grassroots pressures for government action on many urgent problems, notable among them to assure the primacy of environmentally sound practices. One hears a steady stream of ad hoc responses from environmentalists calling for one type of international tax or another. To give but one example, a follow-up study to the Brundtland Commission Report referred to proposals for a climate fund and a planet protection fund.

As the wheel seems to be reinvented daily, with little recognition that detailed proposals already exist, this account has aimed to draw attention to the literature addressed to international taxation, both to the schemes themselves and to the principles underlying them. The ideas examined have ranged from Lorimer's 1884 international tax to be collected from individuals by their national governments to the range of taxes summarized by the Brandt Commission in 1980 to be levied by an international authority including taxes on international trade and travel, resource extraction and military spending.

That the literature surveyed here is not better known is no doubt partly attributable to the influence of the Cold War on intellectual inquiry, partly to the triumph of the practical over the "visionary" and partly to powerful default assumptions which tend both to facilitate our discourse and to limit our horizons. The principal default is that the nation state is the appropriate unit of analysis. Another key assumption is that of the marginal productivity theory of income distribution, which allows us for analytical convenience to regard efficiency and equity as going hand in hand. This is at the heart of the standard Heckscher-Ohlin model of international trade, where specialization according to comparative advantage bypasses problems of international distribution of income.

One can identify several lines of argument whose logic strongly suggests that principles be extended beyond national boundaries. Yet, time and again, habits of mind seem to have prevented that line of demarcation from being crossed. The notion of fiscal federalism was developed to provide economic insights into the fiscal management of federal states. The fiscal federalism writings, however, have taken little note of the international domain, possibly because until recently international jurisdictional spillovers were believed to be sufficiently limited in range so as to be amenable to ad hoc solutions by the few parties involved. Today we recognize the existence of significant negative externalities having global impact, some of which even threaten the survival of life on this planet.

The global market functions within a framework of law and is, in effect, a public good. If an open trading system is to be preserved from protectionist attacks, the addition of compensatory measures must be devised. Global taxation and redistribution should be treated as the reverse side of the coin of globalized markets. We should not speak of one without invoking the other, for severe imbalance between market and society tends to produce upheaval. Where no effective organization exists at the highest level to try to assure such balance, we are reduced to working on the global order jigsaw puzzle handcuffed.

Estimates of how much is likely to be raised by different proposed global taxes, while highly instructive, are really beside the point at this stage. What is essential is that the perception becomes widespread that many national objectives can be achieved only through action at a global level. A global economy requires structures of global governance. Perhaps it will have to be a major economic or ecological crisis that finally wakes us to the necessity for global solutions, just as the Great Depression, the Second World War and the atomic bomb had brought an earlier generation to that conclusion. Perhaps it will of necessity have to be grassroots social movements that bring policymakers to their senses. Perhaps familiarity with the intellectual inheritance that has been surveyed here may be of some small assistance to us as we struggle to shape tomorrow's world.


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