Global Tax Almost A Reality
By Joan Veon
May 3, 2005
At the spring meeting of the IMF/World Bank in Washington, D. C. it was announced that a number of countries will be used to test a $1 tax on airline tickets. This global tax idea has been around for the last twenty years and is now back as a tax that would be relatively easy to put in place. Furthermore, an “International Financing Facility” for immunization will also be set up on a test basis. How could we be this far?
For the last ten years I have followed the topic of global taxation. My journey began in September 1994 when I discovered the UN was going to “float” the idea of global tax at the Social Summit to be held in March 1995 in Copenhagen.
In 1994 the United Nations Development Programme (UNDP) called for a “New World Social Charter where the world will re-distribute wealth as it cannot survive one-quarter rich and three-quarters poor, and where the UN must become the principal custodian of global human security and help with basic education, healthcare, immunization, and family planning.” To meet these goals, they put forth the concept of global taxation. Their suggestions included: a tax on the sale of arms weapons, creating a Global Demilitarization Fund with the savings countries would experience if they reduced military spending by 3% over a ten year period; a global tax of $1 per barrel on oil consumption; a tax on speculative international currency transactions that has been dubbed the “Tobin tax”; and a world income tax of 0.1% on the richest nations with per capita GNP of $10,000. To help reduce the debt of the poorest countries of the world, a number of debt restructuring recommendations were made, including debt cancellation.
At the Social Summit, the UN held a one day pre-conference press briefing. The first panel consisted of a number of UN officials which included Dr. Inge Kaul, co-author of the Human Development Report. The purpose of the panel was to float, for the first time at a UN conference, the idea of global taxation. I was able to ask Dr. Kaul why the countries of the world should provide the UN with $350B in monies from the various global taxes they had put forth in the 1994 Human Development Report, when the UN budget for 1993 was a little over $10B? After seven minutes of trying to provide some kind of rational answer, she said, "I would hope that it would come to the UN...somehow the money has slipped away from us I think it would be only logical...and it is logical that the money comes back to the UN."
Between 1995 and 2000, I occasionally heard about the need to find an independent stream of monies for the UN so they would not be dependent on member country dues. Nothing of importance was put forth until the United Nations Millennium Summit in 2000. The main conference document outlined a number of empowerments for the UN. Interestingly, it only had once sentence with regard to additional monies for the UN: “To ensure that the Organization is provided on a timely and predictable basis with the resources it needs to carry out its mandates.”
The UN also put forth their goals for the people of the world for the third millennium. Known as the Millennium Development Goals (MDG), they include cutting in half the number of people living in extreme poverty, those who are hungry, and those who lack access to safe drinking water; to achieve universal primary education and gender equality in education; to accomplish a three-fourths decline in maternal mortality and a two-thirds decline in mortality among children under five, to halt and reverse the spread of HIV/AIDS and provide special assistance to AIDS orphans; and to improve the lives of 100 million slum-dwellers by 2015. The estimated yearly cost in 2000 was $50B.
In December of that year, UN Secretary-General Kofi Annan appointed Dr. Ernesto Zedillo, former president of Mexico, to head a panel that would advise him on ways to find monies to help finance the Millennium Development Goals. Former U.S. Treasury Secretary Robert Rubin served on this panel. Their recommendations included: increase private capital flows called Foreign Direct Investment (FDI); implementing the World Trade Organization Uruguay Round that calls for liberalization of market access for agricultural products of third world countries; the elimination of export subsidies and the elimination of remaining trade barriers in manufacturing; increasing Overseas Development Assistance (ODA) to 0.7% for all developed countries; a number of global taxes such as the Tobin tax; and a tax on the consumption of fossil fuels, getting every developing countries to get their economic house in order and setting up a common-pool that would finance a country’s promise to meet their commitment to increase their ODA to 0.7%.
At the 2001 Group of Eight heads of state meeting in Genoa, the protestors, who only show up when needed, showed up. While the violence was reported, including the killing of one protestor by an Italian policeman, no one reported what they demanded: global taxation to help reduce the poverty of the world.
In 2002, the UN held a conference specifically to find an income stream. Called “Financing for Development,” this meeting was very unique in that it held a number of Ministerial Round Table discussions in which governments, UN agencies and commissions, non-governmental organizations, business groups such as the International Chamber of Commerce, the World Economic Forum, and churches took part. Basically, the heads of state adopted all of the Zedillo recommendations reflected in the Financing for Development document. The U.S. announced that we would increase our Overseas Development Assistance by 50% over three years by $5B and that it would double in the future from its present rate of 0.2% of GNP.
The next time global taxation surfaced was at the Spring 2004 IMF/World Bank meeting in the Development Committee meeting which is comprised of the IMF/World Bank heads. The Committee members were unwilling at that time to answer a question I raised about global taxation, calling it a “very complex topic” and that the Committee would hold additional discussions on it.
It was French President Jacques Chirac who put global taxation on the agenda of the Group of Eight in Sea Island, Georgia in 2004. Global tax had evolved over a ten year period from a concept for discussion to a major necessity and was now on the table of one of the most powerful meetings of the world. President Chirac called the old ideas for global taxation inequitable and was working with British Prime Minister Tony Blair. They would make their recommendations later in the year. He did just that at the 2005 World Economic Forum where he offered some old, new and revised ideas.
The recommendations from the Chirac/Blair panel included increasing ODA to 0.7% GNP; setting up the International Finance Facility that will float bonds in the international markets based on the commitments of developed countries to increase their ODA (this means another layer of debt around the neck of taxpayers as we would also incur interest on the bonds that would be paid to bondholders); encourage wealthy countries to set up coordinated tax incentives to stimulate and encourage private donations; a small Tobin tax on international financial transactions; and a small tax of $1 on the 3 billion airplane tickets sold each year worldwide along with a tax on fuel used by air and/or sea transport. It should be noted that some of these were recommended by the Zedillo high level panel as well as the 1994 Human Development Report.
At the most recent IMF/World Bank meeting in mid-April, the theme of the meeting was how to fund the UN Millennium Development Goals through global taxation and relief debt for the Highly Indebted Poor Countries (HIPC). Interestingly, at the 1998 G7 heads of state meeting in Birmingham, England, about 50,000 non-governmental organizations and churches held peaceful demonstrations under the Jubilee 2000 Coalition to grant debt relief for the HIPCs. The Development Committee had spent the last year working on global taxation and they offered a 27 page report on “Moving Forward: Financing Modalities Toward the MDGs” that reviewed all of the various global tax recommendations.
With regard to debt relief, the HIPC countries owe a total of $54.5B to a host of creditors, including banks, the Paris Club, bilateral creditors, the World Bank, the IMF, and several others. The G7 Finance Ministers discussed debt relief, which would include forgiving 100% of the debt of some of the poorest countries while forgiving other countries the interest on their debt. When I asked outgoing World Bank President Jim Wolfensohn if these countries would have to enter into debt-for-equity swaps (where a poor country signs over their forests or agricultural lands or other assets equal to the amount forgiven), he did not respond.
With regard to global tax recommendations that are on the table for serious consideration, the greatest money makers are the Global Carbon Tax and the Tobin tax followed by the international aviation fuel. A general financial transaction tax was rated as having a high income stream. Those easiest to collect would be the global carbon tax, the international aviation fuel, the maritime pollution tax, a tax on arm sales, and a tax on the global commons.
It was announced that a $1 tax on airline tickets is going to be tested on a group of countries once their parliaments agree, with the idea that if it works, it will go global. It was also announced that the technical aspects of the International Financing Facility proposal are being worked through in a pilot program for immunization sponsored by the Global Alliance for Vaccines and Immunization (GAVI), a public-private partnership between governments in developing and industrialized countries; NGOs, UNICEF, WHO, emerging vaccine manufacturers, and the World Bank, to name a few of the partners.
Now that global taxation is almost a reality, it is only time before we are hit with a number of other global taxes, depending on what our governments agree to. Furthermore, the citizens of the developed countries are currently paying a type of global tax through the Overseas Development Assistance. We, the American people, are giving $17B of our tax dollars for ODA which is 0.25% GNP. We are told this is not enough. Apparently the U.S. has agreed to much more. If we were to give the 0.7% GNP, it would require another $50B of our tax dollars. In addition, we are agreeing to third world debt forgiveness and the Millennium Development Goals.
Just how much is needed? Currently the HIPC countries owe $54.5B. The cost to meeting the MDGs was $50B in 2000 and will go up to $66B in 2006. They say we need to meet these needs by 2015. At that time the yearly amount will inflate to $126B per year. When I asked World Bank Senior Vice President for Development Economics Mr. Francois Bourguignon how much was too much, he told me that since the developed countries are not giving at the 0.7% ODA, the other global taxes are needed in order to meet the MDGs. Furthermore, with the change in the value of various currencies and the rise in gas, they would need more. Lastly, it is doubtful that the 30 plus countries of the Sub-Sahara would meet their MDGs. The bottom line: more will always be needed. We will never be able to give enough. If and when the International Financing Facility is up and running, who knows the amount, the number of bonds, the interest rates, or the length of bonds that you and I will be responsible for that will create another level of debt in addition to global taxation and an increase in ODA.
In conclusion, a global tax would not be possible if the barriers between the nation-states had not been dismantled. The economic barriers fell with the creation of the IMF/World Bank in 1944; the political barriers fell with the creation of the United Nations; the trade barriers fell with the creation of the World Trade Organization; and the legal barriers fell with the creation of the International Criminal Court. These ideas will be on the table at the G8 in June and at the UN in September. Has the UN found a way to justify their existence? Yes. Can Dr. Kaul feel gratified that she has done her job well? Yes. Will the people of the world ever recover? No.
Bend over and grab your ankles, cuz here it comes! :-P
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