{"id":57463,"date":"2021-06-12T07:18:29","date_gmt":"2021-06-12T06:18:29","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=57463"},"modified":"2021-06-12T07:18:29","modified_gmt":"2021-06-12T06:18:29","slug":"its-time-for-a-financial-transaction-tax-to-support-developing-countries-need-for-vaccines","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2021\/06\/12\/its-time-for-a-financial-transaction-tax-to-support-developing-countries-need-for-vaccines\/","title":{"rendered":"It’s time for a financial transaction tax to support developing countries’ need for vaccines"},"content":{"rendered":"

This letter was sent to the G7 leadership yesterday by a rather large group of economists, activists and practitioners. I was one of the signatories and am pleased to share it here. To see all the signatories download the PDF version:<\/a><\/em><\/p>\n

\n

Letter to G7 Countries <\/span>in Support of an Emergency FTT to Assist Developing Democracies <\/span><\/h2>\n

June 11,\u00a0 2021.<\/strong><\/p>\n

To the G7:<\/p>\n

We the undersigned are a diverse,\u00a0 non-partisan group of economists, lawyers, tax experts, public policy analysts, developing country specialists, accountants, advisors on ethics, health specialists, documentary filmmakers, business people, journalists, and anti-poverty, tax justice, and human rights advocates from all G7 countries and several developing democracies.<\/p>\n

We have joined together to request that you consider one very specific, practical proposal\u00a0 \u2013 a financial transactions tax (FTT), to be adopted initially by\u00a0 G7 members and then proliferated worldwide.<\/p>\n

We believe that a global FTT would eventually raise substantial revenue\u00a0 for many countries, including for the G7. But given the emergency situation in poor countries right now<\/em>, our focus here is on them. Given the dominance of G7 financial markets, a G7-wide FTT could quickly start to provide\u00a0 at least $50 billion a year of emergency finance to fund vital public works and longer-term investments in developing countries, especially struggling young democracies.<\/p>\n

As summarized below, the case for a G7-wide\u00a0 FTT is strong and the time is now.<\/p>\n

    \n
  1. We applaud the G7\u2019s support for a minimum global corporate income tax (CIT) rate for multinational corporations,[1]<\/sup><\/a> though its current proposals would do little for poorer countries. Indeed, they would actually reinforce the unfair bias of international tax rules in favor of the richest countries, which host most of these corporations. If this were the only<\/em> collective tax reform that the G7 undertakes right now, therefore, a huge opportunity will be missed \u2013 the chance to help developing countries recover from this historic tax injustice as well from as the pandemic, and to help finance public investments and advance the cause of international tax justice.<\/li>\n
  2. In particular, all the incremental revenue from the G7\u2019s proposed CIT rate reform would go to a comparative handful of relatively-affluent \u201cresidence\u201d countries where multinationals have their headquarters\u2013including most of the G7.\u00a0Given that developing democracies are much more dependent on the CIT for tax revenue, this is not helpful.[2]<\/sup><\/a><\/li>\n
  3. No one can deny that since March 2020, the pandemic has inflicted great\u00a0 hardship on G7 countries, with over 1.1 million deaths, significant economic losses, and untold personal suffering. However, with the help of $trillions in deficit spending, strict public health measures, and abundant vaccines, by now the G7 as a whole is well on its way to economic recovery and to conquering the pandemic.<\/li>\n
  4. Sadly, this is not <\/em>the case in key developing democracies <\/em>like Argentina, Brazil, Ecuador, India, Kenya, Mexico,\u00a0 Nepal,\u00a0 Nigeria, Peru, or South Africa, which are still fighting fierce daily \u201cstreet battles\u201d with new COVID19 cases, vaccine shortages, job losses, rising poverty, crime, terrorism, the climate crisis, and financial instability \u2013\u00a0 all at once.<\/li>\n
  5. Several of these countries were already heavily indebted to begin with, before the pandemic. They now lack the tax bases and debt capacity needed to bootstrap themselves out of the crisis. So for many, recovery is not in sight until 2024-25 at best. Essential long-term investments in health, education, and climate preservation have been pushed off the table, and the UN\u2019s SDG 2030 development goals for reducing poverty and inequality are at risk of disappearing over the horizon. Indeed, in several countries, nothing less than the\u00a0 future of democratic development is now at stake.<\/li>\n
  6. Given this situation, we ask you to consider just one specific addition to the G7\u2019s tax reform agenda. This is not an economist\u2019s pipe dream, but a solution that has been field-tested again and again over many years in more than 40 countries and jurisdictions \u2013 from Hong Kong and Kenya to New York State and the City of London. The combined revenues raised (or rebated) by these taxes already<\/em> averages at least $15 to $20 billion a year.[3]<\/sup><\/a> Indeed, most G7 countries already have FTTs in various stages of rollout \u2013 they just have to be reinvigorated, harmonized and promoted.<\/li>\n
  7. There are of course many variations on financial transactions taxes, some of which are quite elaborate. But to seize the opportunity presented by the crisis <\/em>and get started,<\/em> we are simply asking the G7 to agree on a 0.1% transactions tax on all stock trades, paid for by investors located anywhere in the world who transact through G7 <\/em>public exchanges<\/em>.[4]<\/sup><\/a><\/li>\n<\/ol>\n

    As noted, this approach follows in the footsteps of many other similar taxes that have operated successfully for generations \u2013 \u00a0in the UK since at least 1714; in New York State since 1905;\u00a0in Hong Kong for decades. Just this February, Hong Kong raised<\/em> its stock transaction tax by 30 percent to .26%,\u00a0 in response to a budget crisis. This move has been a success.[5]<\/sup><\/a><\/p>\n

      \n
    1. While the proposed 0.1% tax rate on stock trades might not sound steep, it does not need to be any higher to raise large revenues. Global stock trading has recently been setting records. In 2020, for example, New York\u2019s top two exchanges, the NYSE and the NASDQ, registered nearly $60 trillion in trades, nearly half the total volume of the world\u2019s 85 stock exchanges. At this pace,\u00a0 even this tiny tax on publicly-traded equities that are transacted on G7 exchanges would easily (and quickly) start to\u00a0 generate at least $50 billion a year for developing countries, over and above Official Development Assistance (ODA).<\/li>\n
    2. Of course much more revenue could be generated \u2013 for rich and poor countries alike \u2013 if an FTT were widely adopted by financial exchanges in other countries. And even more<\/em> revenue could be raised if the tax were extended to other traded assets, like bonds, derivatives, currencies, collectibles, crypto-currency, a variety of hedge fund transactions, and real estate.[6]<\/sup><\/a><\/li>\n<\/ol>\n

      But these refinements are for the future, given the fact that the immediate needs of developing countries are so dire.\u00a0 Our focus here is\u00a0 appropriately on encouraging the G7 to adopt a version of the FTT that is as simple as possible for everyone to implement ASAP, right now.<\/em><\/p>\n

        \n
      1. In addition to the global FTT\u2019s main attraction \u2013 its proven ability to raise an enormous amount of revenue very quickly \u2013 it also has several other key advantages.<\/li>\n<\/ol>\n