Robin Hood, Robin Hood, dum dum dum de dum: financial transaction tax update from Max Lawson
The Robin Hood Tax campaign to fund development and climate change adaptation via a small financial transactions tax (FTT) is potentially one of the campaigning success stories of recent years – an object lesson in how to seize the moment (global financial crisis and fiscal horror story in the rich countries) to promote a good policy (redistributive taxation that can unlock significant new resources for development). Why potentially? Because nothing has yet been agreed, but progress towards real agreement is starting to look increasingly solid. Max Lawson, Oxfam’s man in the green tights (but not the guy to the right – I think that’s Javier from Oxfam Intermon in Spain), has this update for wonks, from the heart of the Robin Hood Tax campaign.
“An agreement on an FTT of some sort at the level of the Eurozone is now the most likely possibility in 2011, under pressure from Germany and France. They would then be joined by a group of nations from the G20, including Brazil and South Africa, which already have some form of FTT. It is most likely to be a compromise in the shape of a transaction tax on shares (STT) and their derivatives, known as Stamp Duty. An FTT at Eurozone level could raise $10-20 billion annually, depending on the rate and transactions covered. EU-wide progress (i.e. including non Eurozone countries) is possible, but less likely due to objections from the UK, Sweden and others.
Everything depends on the Germans and French reaching an agreed compromise proposal. The French still prefer a tax on currency transactions or foreign exchange. The Germans currently prefer a broad-based FTT on shares and bonds and their derivatives, but not on currency transactions. The two finance ministries are working very closely together, but have it seems yet to agree a compromise.
The Financial Activities Tax (FAT) tax remains the favoured option of the European Commission and the UK. However no country is actively pursuing the FAT, the French oppose it and the Germans have now turned against it for constitutional reasons.”
[But will the money get spent on development and climate change, or be swallowed up by rich countries’ fiscal deficits?]
“The French actively support the use of revenues for development and climate change. The German finance minister has said twice publicly that he could see the revenues from their FTT being spent on development and climate change in order to secure a compromise. Pressure needs to be increased on Germany and other supporters of the FTT like Austria to ensure the revenues are used for poverty and climate. Pressure from G20 nations and leaders of African countries will be critical in this regard.
Outside of the EU, President Sarkozy has put Bill Gates in charge of preparing a report and recommendations on innovative financing mechanisms on behalf of the G20. Bill Gates is yet to be convinced of the FTT. The US remains opposed to implementing an FTT themselves, but are not actively against others pursuing it. Countries in the G20 that already have some form of FTT such as South Africa are likely to be supportive and can be persuaded to publicly call for the revenues of a European FTT to be used for climate change and development.
As in the Eurozone, the most likely compromise is around a tax on share transactions (STT), or Stamp Duty. Eight countries in the EU have such taxes already (including the UK), as do South Africa, Brazil, Korea, Australia and India making a coalition within the G20 around the Stamp Duty the most likely step. Extending these taxes to derivatives, as is done in India and Taiwan, would increase revenue. Whilst not a full FTT, this compromise would still set a major precedent and raise significant revenue. At 0.5% the UK Stamp Duty is one of the largest in the world and raises $4 billion dollars each year, and this is one form of FTT that the UK could not oppose.
So what would be the ideal process over the next six months?
· African ministers and key figures call for an FTT for development and climate change at the Spring Meetings this week
· 1000 economists write to the G20 and Bill Gates calling for an FTT at the G20 finance ministers’ meeting on April 15th (we can tick that one off – see here for letter and full list of signatories)
· South Africa, France and Germany announce their support for the FTT for development and climate change in the run up to and margins of the G8 in May
· Eurozone leaders announce they will push ahead with an FTT in June, ahead of the European Council, following the second global day of action on FTT.
· At the Annual Meetings other G20 nations show their support, including Brazil and South Korea.
· This is further built on at the final G20 finance ministers meeting, building on the full report from Bill Gates.
· At the G20 in France heads of state from the coalition of willing nations agrees to the implementation of their FTTs and the use of the revenues to help fight climate change and development and a clear timetable to make this happen.
· At the UN climate change summit in Durban, South Africa in December, the contribution of the FTT to climate finance helps unlock negotiations.”
In a few months, we can compare this Lawsonian dream to reality …….