Several European countries may adapt a new Financial Transaction Tax by January 2014. That could be a big boon for international health and development.
Here’s the story. The European Commission is moving forward on small tax on financial transactions with the agreement of 11 key EU member states: Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia. This represents two thirds of the GDP of the EU. The proposed taxes range from 0.1% “for shares and bonds, units of collective investment funds, money market instruments, repurchase agreements and securities lending agreements, and 0.01% for derivative products.” Typical consumer transactions, like credit card payments, mortgages and currency exchanges are excluded.
The European Commission expects about $30-$35 billion in new revenue through this scheme. So where would that go? That is for each individual member state to decide, but there is lots of discussion, and some momentum, that at least a portion of the revenue goes towards international development and global health.
During his United Nations speech in September, French president Francois Hollande, who commands the second largest economy of these 11 participating member states, explicitly called for the financial transaction tax to benefit international development.
Speaking of development, I also want us to take an honest look at reality. We will not achieve the Millennium Development Goals without new resources. We are all aware of our respective nations’ budgetary constraints. That’s why, here at this UN forum, I am issuing a call for innovative financing. It would give our organizations the resources to effectively fight diseases — HIV-AIDS, malaria etc. I want to applaud the success of UNITAID, which was financed by a tax on plane tickets. This is the path upon which we have embarked. Now we must take the next step, which I propose: establishing a financial transaction tax, to which several European countries have already agreed, so that capital movements can be reined in or, if they are not, can – through this tax – finance development and fight threats to public health. France has created such a tax. France has even made another commitment: to earmark at least 10% of this tax for development and for fighting public health threats and pandemics.
That is the message I wanted to send you today: let’s ensure that a global financial transaction tax is instituted and its revenues are allocated to development and the fight against pandemics. It would be a fine example of what I call the globalization of solidarity. It is one of the most beautiful ideas that the world can uphold.
The phrase “Globilization of Solidarity” (which sounds much better in French) was coined by fellow Frenchman Philippe Douste-Blazy, who is the UN under-secretary General for innovative financing for development, the chair of UNITAID, and former foreign minister of France. In September 2011 UNITAID commissioned a feasibility study of implementing an FTT across all G20 member states and found that it could raise as much as 265 bn euros/year.
The politics here in the USA are very far from even considering an FTT as a source of revenue, let alone to support foreign aid. Still, it seems that there is momentum among some of the largest economies in the world to devote a portion of these revenues to international development. The press release from the European Commission explaining this new scheme says as much:
How much revenue is the FTT expected to generate? How will this be used?
The proposed FTT applied under enhanced cooperation is expected to generate €30-35 billion a year, corresponding to 1% of the participating Member States’ tax revenues.
The Commission has proposed that a portion of the revenue could be used as an own resource for the EU budget, resulting in a corresponding reduction of the national GNI contributions of participating Member States. The money for the national budgets could be used to help consolidate public finances, invest in growth-promoting activity, or meet development aid commitments. Ultimately, it will be for participating Member States to decide how the revenues of the FTT should be used. (Emphasis added)
To put these numbers in context: The total money from all sources around the world to fight HIV/AIDS in 2011 was $16.8bn. UNAIDS says $22-$24bn is needed to fully fund a global AIDS response that treats every patient and implements every HIV prevention strategy. With about $7bn more every year we can end AIDS within a generation. But we need new funding sources, so opportunities for new revenue like an FTT are particularly attractive.
The estimated 35bn euros/year in FTT revenue roughly equals $47bn. If just a small portion of that goes to supporting global health and development we can go along way to making the world a healthier place for all.