Global tax almost a reality

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 20 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 10 years, I have followed the topic of global taxation. My journey began in September 1994 when I discovered the United Nations 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 called for a

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New World Social Charter where the world will redistribute wealth as it cannot survive one-quarter rich and three-quarters poor, and where the United Nations must become the principal custodian of global human security and help with basic education, health care, 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;

   

• a Global Demilitarization Fund with the savings countries would experience if they reduced military spending by 3 percent over a 10-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";

   

• a world income tax of 0.1 percent 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 also made, including debt cancellation.

At the Social Summit, the United Nations held a one day pre-conference press briefing. The first panel consisted of a number of U.N. 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 U.N. conference – the idea of global taxation. I was able to ask Dr. Kaul why the countries of the world should provide the United Nations with $350 billion in monies from the various global taxes they had put forth in the "1994 Human Development Report," when the U.N. budget for 1993 was a little over $10 billion? After seven minutes of trying to provide some kind of rational answer, she said, "I would hope that it would come to the United Nations ... 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 United Nations."

Between 1995 and 2000, I occasionally heard about the need to find an independent stream of monies for the United Nations so they would not be dependent on member country dues. Nothing of importance was put forth until the U.N. Millennium Summit in 2000. The main conference document outlined a number of empowerments for the United Nations. Interestingly, it only had once sentence with regard to additional monies for the United Nations: "To ensure that the Organization is provided on a timely and predictable basis with the resources it needs to carry out its mandates."

The United Nations also put forth their goals for the people of the world for the third millennium. Known as the Millennium Development Goals, 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;

   

• achieving universal primary education and gender equality in education;

   

• accomplishing a three-fourths decline in maternal mortality and a two-thirds decline in mortality among children under five;

   

• halting and reversing the spread of HIV-AIDS and providing special assistance to AIDS orphans;

   

• and improving the lives of 100 million slum-dwellers by 2015.

   

The estimated yearly cost in 2000 was $50 billion.

In December of that year, U.N. 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:

 

• increasing private capital flows (called Foreign Direct Investment);

   

• 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 to 0.7 percent for all developed countries;

   

• a number of global taxes such as the Tobin tax;

   

• and a tax on the consumption of fossil fuels.

   

At the 2001 Group of Eight heads of state meeting in Genoa, the protesters – who only show up when needed – showed up. While the violence was reported, including the killing of one protester by an Italian policeman, no one reported what they demanded: global taxation to help reduce the poverty of the world.

In 2002, the United Nations 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, U.N. 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 United States announced that we would increase our Overseas Development Assistance by 50 percent over three years by $5 billion and that it would double in the future from its present rate of 0.2 percent 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, Ga., in 2004. Global taxation had evolved over a 10-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 percent 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 U.N. Millennium Development Goals through global taxation and relief debt for the Highly Indebted Poor Countries. 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 Highly Indebted Poor Countries owe a total of $54.5 billion 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 percent 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 arms 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, a public-private partnership between governments in developing and industrialized countries, NGOs, UNICEF, WHO, emerging vaccine manufacturers, and the World Bank – to name just 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 $17 billion of our tax dollars for ODA, which is 0.25 percent GNP. We are told this is not enough. Apparently the United States has agreed to much more. If we were to give the 0.7 percent GNP, it would require another $50 billion 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 $54.5 billion. The cost to meeting the MDGs was $50 billion in 2000 and will go up to $66 billion in 2006. They say we need to meet these needs by 2015. At that time, the yearly amount will inflate to $126 billion 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 percent 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 United Nations in September. Has the United Nations found a way to justify their existence? Yes. Can Dr. Kaul feel gratified she has done her job well? Yes. Will the people of the world ever recover? No.

Joan Veon is president of Veon Financial Services, Inc., an investment advisory firm, and an independent international reporter. Please visit her website, WomensGroup.org.