For a tax on the global financial sector
Paris, 2 December 2009.
Innovative financing to help development, the idea is gaining ground
For a tax on the global financial sector
Recently interest has been growing, far beyond France’s borders, in the concept of innovative, stable, predictable financing complementing traditional public financing. It’s an idea the Foreign and Finance Ministries have been promoting for nearly four years.
An idea France put back on the international agenda in spring 2009, well before the emergence of discussions on financing adaptation to climate change and the debate on the contribution of the financial sector to ending the crisis.
In May this year, representatives of 59 countries, NGOs and international organizations met in Paris under our two ministries’ auspices: France has promoted the launch of an ad hoc working group to evaluate and propose the establishment of an international solidarity contribution. This would be based on foreign exchange transactions and, more broadly, on securities, to finance development and the achievement of the Millennium Development Goals on which the international community will be called to account in 2015 – you might just as well say tomorrow.
Since then, France has constantly championed the idea: at the United Nations General Assembly in New York, everyone welcomed our proposal, and a few days later in Pittsburgh, the G20 went along with the need to study the feasibility of these mechanisms. The great and good from the finance ministry community also came out in favour of the French views, something deemed inconceivable. At the G20 finance ministers’ meeting in St Andrews, the British Prime Minister talked about taxing international financial transactions as one of the tools for resolving financial crises.
This idea is at the nexus of the problems of regulating the global financial system and international solidarity for development.
These initiatives address the concerns of both those who want to finance climate change and those keen to improve the solidity of the international financial system by making the banks themselves pay the cost of possible failure.
In Pittsburgh, the heads of State clearly affirmed the need to study the feasibility of these mechanisms. The International Monetary Fund (IMF) has been tasked with looking into an international tax on financial institutions. There are various possible tax bases. These initiatives, these discussions, which must be international if we want them to lead to shared decisions, clearly show the existence of a strong political will to explore further the concept of these tools.
A tax on the global financial sector can finance development. When the time comes, a collective decision will have to be made. Let’s be clear about this, we are not proposing a Tobin tax, whose primary objective was to regulate an excessively erratic currency market. No, the aim is to finance development without disrupting financial transactions.
A levy of 5 euro-cents on €1,000 would be painless, but not without consequences for the developing world: since even such an insignificant tax could yield as much as €35 billion!
This money has to help satisfy primary needs: water, food security, education and health. This is what is urgent when a billion people have no access to drinking water, a billion people are starving, when poverty prevents children from going to school and fulfilling their potential and a million people die every year from malaria… These funds could also help finance adaptation to climate change and access to energy.
Finally, the revenue could correct the disruption resulting from the autumn 2008 financial crisis by preventing national budgets being exposed to banking system risks.
So innovative financing mechanisms are an obvious solution. To address a major challenge of the new century, innovative financing is no longer a simple option, it has become an obvious solution. France has championed this from the outset by adopting two mechanisms which have proved their efficacy: the plane ticket levy created in 2006 which finances the fight against the major pandemics and the International Finance Facility for vaccination and immunization, a Franco-British initiative.
Today, France is still in the vanguard: on 22 October this year in Paris we brought together the foreign affairs and finance ministers of 12 different countries, countries of the South (Senegal), emerging powers (Brazil), major European powers (Spain, Germany, etc.), States with the main financial centres (Britain and Japan). All adopted a declaration supporting the French initiative. Tomorrow we shall have to convince the United States and China to join this initiative. France will then have succeeded, once again, in shifting positions by championing debate and initiative in order to take international cohesion and stability forward./.