Today's date:
Fall 2010

A Global Tax for Development

Bernard Kouchner is the foreign minister of France, Katsuya Okada is the foreign minister of Japan, and Charles Michel is the development cooperation minister of Belgium.

Do you know the realities of today’s world? A billion people don’t have access to drinking water; a billion people suffer from hunger; nearly one million people die each year of malaria, 1.3 million of tuberculosis and 2 million of AIDS; and poverty keeps some 72 million children out of school and prevents them from realizing their potential.

To tackle such global issues, the United Nations set out the Millennium Development Goals (MDGs), which the international community should achieve by the year 2015. A wide range of financial resources that are sustainable, predictable and additional to the traditional Official Development Aid (ODA) need to be mobilized to meet the global development needs, including the MDGs. Given the relentless urgency, we must act.

We are determined to find an effective way to finance development that would be alongside—and not in place of—public aid. In a world marked by substantial gaps in development and standards of living, we must promote innovative approaches and instruments.

Actual measures for innovative financing include, among others, taxes on airline tickets to finance access to essential medicines through UNITAID, a fund hosted by the World Heath Organization (WHO), and bonds secured by government pledges to finance for immunization (GAVI). Such measures have mobilized resources to fight against the three major infectious diseases (HIV/AIDS, tuberculosis and malaria) and to scale up immunization programs. They have produced remarkable results. Moreover, efforts to encourage voluntary contributions such as donations by citizens, consumers and companies have been made.

The Doha Conference in November, 2008, called on the world to change the dimensions of innovative development financing. New instruments that are based on global activities are becoming available to us—broad-based financing that could, through minuscule contributions repeated numerous times, change the dimensions of hope, if properly coordinated.

France has promoted innovative development financing from the start. With Spain, Brazil, Chile and others, it launched the Leading Group on Innovative Financing for Development in 2006, and 60 member states have already joined. Japan assumed the presidency of the Leading Group in June and will hold the eighth plenary meeting in December. Under its presidency of the European Union, Belgium decided to put the issue on the development agenda. Discussion on innovative development financing must now be further extended to the global political arena through the efforts of the Leading Group, including Japan, Belgium and France.

As a concrete step toward this aim, we established the Taskforce on International Financial Transaction for Development in October, 2009, with the objective of coming up with a shared analysis of what is feasible and making concrete, realistic proposals.

We approached the top specialists—legal scholars, economists, researchers and even bankers—to analyze the different options. They proposed several different mechanisms for levies on financial transactions, including on foreign exchange movements (currency transaction development tax).

Their work is now available in a solid, well-documented report. This report assesses technical issues in a comprehensive manner and provides estimates on tax revenues. The report mentions that a levy of five cents for each $1,000 exchanged could bring in more than $30 billion per year. It supplements and updates other analyses carried out regularly over the years by the UN, the European Commission and the Landau Report. It also offers us common ground to discuss innovative financing and has started to play a significant role in evoking greater international discussion.

The report and other sources mention that with financial flows up sevenfold since the beginning of the decade, the financial sector is one of the main beneficiaries of global economic growth, and the volume of foreign exchange transactions worldwide is about $3.6 trillion daily, so the volume of all transactions (stocks, bonds, derivatives) is even higher ($210 billion daily for bonds and $800 billion for stocks).

What should be done with the revenues mobilized by innovative financing, and how?

Toward 2015, the target year of the MDGs, we must provide safe water for a billion people, enough food for a billion people, appropriate treatment for major pandemics, and education for children. 

For approaching these goals, we should not be inward-looking. We need to have sympathy, as fellow human beings, for people who are struggling throughout the world and extend support for developing countries.

We cannot rely only on the traditional ODA. The real challenge today is designing an innovative mechanism based on strict governance and allocation criteria. It is time to act, and to do it in an exemplary fashion.