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Africa: Innovative Financing
AfricaFocus Bulletin
Sep 30, 2006 (060930)
(Reposted from sources cited below)
Editor's Note
Beginning in July, international air travelers from France have
been paying a 4 euro tax on an economy ticket and 40 euros on a
first-class ticket, with proceeds going to pay for treatment of
children with AIDS, tuberculosis, and malaria. Eighteen other
countries have pledged to implement the tax, including Brazil, the
United Kingdom, Norway, Mali, and South Korea.
This measure, one international initiative by a group of countries
calling themselves the Leading Group on Solidarity Levies, will
initially provide only a modest $300 million a year. And the United
States remains adamantly opposes even to mention of such
"international taxes." But supporters hope it will set a precedent
for new ways of financing international development.
This AfricaFocus Bulletin contains several documents on initiatives
by the Leading Group on Solidarity, a coalition now counting more
than 40 countries working on "innovative sources of financing for
development." For additional background and updates on this and
related issues, see the Global Policy website (http://www.globalpolicy.org/socecon/glotax/general).
Another AfricaFocus Bulletin sent out today contains a press
release and excerpts from an overview from the new UNCTAD study.
The full report is available on the UNCTAD website
(http://www.unctad.org).
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Chair's Summary of the Paris Conference on Innovative Financing for
Development
Paris - March 1, 2006
http://www.elysee.fr
93 states met in Paris on 28 February and 1 March 2006 on the
occasion of the ministerial conference on Innovative Financing for
Development organised at the initiative of the President of the
French Republic, Mr Jacques Chirac, with Mr Denis Sassou Ngesso,
President of the Congo Republic, Chairman of the African Union, Mr
Toumani Toure, President of the Republic of Mali, Mr Kofi Annan,
Secretary General of the Organisation of United Nations, and Mrs
Graca Machel in attendance. International and non-governmental
organisations were involved in this event and are listed in the
annex. This conference marks a new step towards rallying the
support of the international community for innovative financing for
development. It follows the World Leaders' Meeting for Action
against Hunger and Poverty organised by the United Nations at the
initiative of Brazilian President Luiz Inacio Lula da Silva in
September 2004 and the subsequent signing of the Declaration on
Innovative Sources of Financing for Development by 79 countries in
September 2005. The idea of innovative financing for development is
now an issue on the agenda of all major international forums and
its principle has gained broad support on the part of the
international community. Substantive technical work has provided
solid bases for action, as shown by the Report of the Technical
Group on Innovative Financing Mechanism presented in New York in
September 2004.
Participants recalled that the Millennium Development Goals (MDGs)
cannot be achieved in 2015 unless globalisation becomes more
equitable. In addition to the commitments that have already been
made, official development assistance (ODA) must be increased and
made more predictable. Innovative financing sources supplementing
traditional ODA will help finance over the long term recurrent
expenditure that is needed to achieve the MDGs.
Participants reviewed the different options for Innovative
Financing for Development sources and noted that it was essential
to continue discussions at an international level on several issues
including international solidarity levies, the International
Finance Facility (IFF) and its pilot applied to immunisation
(IFFIm) in particular, contributing to reduce tax evasion and
taxing financial transactions, facilitating and lowering remittance
costs for migrant workers, a humanitarian lottery, initiatives on
the part of local governments, and voluntary contributions from
individuals and companies such as the recently announced "RED"
initiative for combating HIV/AIDS. These issues were debated in
workshops on March 1, 2006.
The intention expressed by Brazil, Chile, Congo, Cyprus, Ivory
Coast, France, Jordan, Luxemburg, Madagascar, Mauritius, Nicaragua
and Norway to implement the international air-ticket solidarity
contribution was welcomed. Other countries are set to follow suit.
France and the United Kingdom, which have already implemented an
air ticket solidarity levy, had the opportunity during the
conference to publish a joint communiqu‚ on innovative financing
mechanisms.
Participants noted that several innovative sources were
particularly well adapted to financing health-related development
programmes, although this is not the only sector in which they can
be applied. They stressed that the fight against HIV/AIDS,
tuberculosis and malaria must be carried out via the strengthening
of developing countries' health systems. National authorities with
the help of cooperation agencies must take strong and sustainable
action to this end. However more efforts must be made at an
international level to improve access to low-cost drugs if the goal
of universal access to HIV/AIDS treatments is to be achieved by
2010. With this in mind, participants reviewed the proposal to
create an International Drug Purchase Facility (IDPF).
Participants would like innovative financing for development to
remain on the agenda of the United Nations and other major
international forums and will take an active part in future
discussions on this issue. They agreed to meet again in 2007 at a
"Forum on Innovative Financing for Development sources" to build on
the momentum created in New York in September 2004, renewed in
September 2005 and continued during this conference.
Participants have welcomed the creation of the Leading Group on
Solidarity Levies to fund development which includes the following
countries:
Algeria / Austria / Belgium / Benin / Burundi / Brazil / Cambodia
/ Cameroon / Cape Verde / Chile / Congo / Cyprus / Ethiopia /
France / Gabon / Germany / Guinea-Conakry / Ha‹ti / India / Ivory
Coast / Jordan / Lebanon / Luxemburg / Madagascar / Mali /
Mauritania / Mauritius / Mexico / Morocco / Mozambique / Namibia /
Nicaragua / Niger / Norway / Spain / South Africa / South Korea /
United Kingdom
Plenary Session of the Pilot Group on
Innovative Financial Mechanisms, Brasilia, July 6-7, 2006
Leading Group on Solidarity Levies to Fund Developmen
t
July 6-7 2006
http://www.globalpolicy.org/socecon/glotax/general
Chair's Summary
The Meeting of the Pilot Group on Innovative Financing Mechanisms
was held in Brasilia, July 6-7, 2006. The Opening Session was
presided over by Ambassador Celso Amorim, Minister of External
Relations, and was attended by Luiz Dulci, Minister-Chief of the
President's Office's Secretariat, Jacques Lapouge, Director of the
Economic and Financial Affairs Department of France's Ministry of
Foreign Affairs, and Jorge Durao, President of the Brazilian NGOs
Association (ABONG). Forty countries, in addition to international
and nongovernmental organizations also participated in the meeting,
as shown in the attached list.
The Meeting took place at a new stage of the Action against Hunger
and Poverty launched by President Luiz Inacio Lula da Silva in
September 2004. This new stage is characterized by the definition
of specific actions aimed at raising funds and channeling them to
the promotion of economic and social development.
The Plenary Meeting demonstrated the growing consensus about the
role innovative mechanisms may play in raising the amount of
resources available for developing countries, as a supplementation
of the traditional sources of funds, so that they can achieve the
Millennium Development Objectives by 2015. In less than two years
we have managed to raise the international awareness of the hunger
and poverty issue and to make significant progress. The issue is
now part of the agenda of the major international organizations.
The ripening of the discussion and assessment of innovative
financing mechanisms already makes possible the adoption of
specific, concrete projects, as witness the Paris Conference in
February and March of this year convened at President Jacques
Chirac's initiative. On that occasion, the proposal for the
establishment of a solidarity levy on airline tickets met with
broad support.
This meeting worked through panels at which government, civil
society, and private sector representatives furthered the debate
about innovative financing mechanisms and the advantages of their
implementation.
Studies were presented on the potential for raising funds from the
levies on international financial transactions, particularly in
view of the advances of globalization and the increased volume of
transactions. On the other hand, urgent attention must be given to
the issue of tax evasion, which erodes the tax base of several
countries, thereby reducing the resources available for combating
hunger and poverty. In this connection, several participants
suggested that international institutions devoted to this issue
should amplify their action on behalf of developing countries, and
proposed that a specific conference on tax evasion should be held.
The discussion of the issuing of special drawing rights for
development projects was carried further.
The participants called attention also to the role the
International Financing Mechanism could play in anticipating
disbursements of resources needed for achieving the Millennium
Development Objectives. It is thus promising that a pilot project
for the financing of vaccination in developing countries will be
launched in the short run.
With respect to emigrant remittances, it was thought that, although
they are not a properly called innovative mechanism, they inject
significant resources into the developing countries. Obstacles to
be overcome in this regard include the excessive cost of transfers,
the scarce geographical coverage, and the lack of a banking
culture. It would also be necessary to enhance the impact of
remittances on the development of the receiving countries while
respecting the transfer's private character.
In addition, the participants thought that it is important to
further encourage voluntary contributions through international and
nongovernmental organizations, and the private sector. Civil
society has an equally important role in monitoring the use of
resources, so as to make project implementation more effective and
transparent.
The Meeting confirmed the broad support to the proposal of a
solidarity levy on airline tickets and provided the opportunity for
an exchange of information on the modalities to be implemented. The
pilot project on this matter is already being implemented in
several countries. The participants reiterated the legitimacy of
this contribution, which is based on a sector that does not suffer
from a heavy tax burden. The Meeting made decisive progress also
toward the establishment of the International Drug Purchase
Facility. With resources from the solidarity levy, this Facility
will play a major role in combating AIDS, malaria, and
tuberculosis.
Also examined were issues pertaining to the structure of
governance; there was also broad consensus on the need to ensure
the participation of civil society in decision-making processes. In
this connection, the meeting gave opportunity for consultations
with representatives of civil society, who made suggestions on
various aspects of the initiative. During the meeting a precise
timetable was agreed for encounters up to the opening of the United
Nations General Assembly, when the establishment of the Drug
Purchase Facility will be made official at high level.
This encounter has also served to identify other innovative
projects, thereby fulfilling an essential Pilot Group task. As
indicated by the panels, some of these projects are already
yielding fruit, such as the Social Stock Exchange and the Global
Digital Solidarity Fund. Other projects, such as the humanitarian
lottery, are also very promising.
The Guyana representative informed that that country, as
Pro-Tempore President of the Rio Group, intend to hold a workshop
on innovative financing mechanisms. The representative of Norway,
which will assume the rotating chairmanship of the Group in
September, announced the intention of organizing a technical
workshop with international organizations, NGOs and the academy.
The results of this workshop will serve as an input to the meeting
of the Leading Group, to be held in Oslo early in 2007. The
representatives of Spain and Chile put forward proposals of new
pilot projects, relating, respectively, to remittances and child
malnutrition. These proposals could be death with by the Group in
the next months.
Encouraged by the progress made at this Meeting, the participants
expressed the hope that, as new pilot projects are adopted, other
countries will decide to join the Group and adhere to the
innovative financing mechanisms, thereby reinforcing concrete
actions and increasing the resources available for combating hunger
and poverty.
From Concept to Reality
On the present state of the debate on international taxes
by Peter Wahl
Friedrich Ebert Stiftung
[Brief excerpts only. Full 9-page briefing paper available at
http://www.fes.de/globalization]
Introduction
In 1996 a number of UN Development Programme staff members
published a book (Ul Haq et al. 1996) in which they proposed an
international tax on currency transactions (the so-called Tobin
tax). The publication may be said to have opened the discussion on
international taxes.
...
Breakthrough in Paris
As of July 1, 2006, France will be levying a tax on air tickets;
the revenues from the tax are set to flow into a fund set up to
combat Aids, malaria, and tuberculosis in the developing world.
France sees this as a contribution to reaching the Millennium
Development Goals (MDGs). The Chilean government has also decided
in favor of an air-ticket tax and has already initiated the
appropriate legislative procedures. Brazil likewise plans to
introduce a tax on air tickets in the course of 2006.
,,,
The Paris conference is the culmination point of a process set in
motion by UNDP in 1996. This is a brief period of time,
particularly if we consider the fact that in historical terms
international taxation is a wholly new phenomenon. After all, until
now taxation has been conceivable only in the national framework
Under heavy attack, above all by the finance community, the
currency transaction tax (CTT) has dominated the debate up to this
point. But in view of the political acceptance problems with which
the CCT has had to contend in recent years, other taxes have also
come in for discussion. In 2002, for example, the German Advisory
Council on Global Change (WBGU) published a report taking a closer
look at air-ticket taxes and other instruments of environmental
policy (WBGU 2002). The most influential relevant study published
thus far is the so-called Landau Report (Landau 2004). Prepared on
behalf of French President Chirac, the report analyzes the whole
range of different concepts advanced for international taxes. It
has at the same time served as the basis for a report submitted to
the UN General Assembly by the so-called Lula Group - France
Brazil, Chile, and Spain.
With the votes of 115 countries, the UN General Assembly in 2004
adopted a resolution calling for an examination of international
taxes as an instrument of development financing. Problems
associated with the need to fund the MDGs are exerting more and
more pressure working to develop both new and additional sources of
funding. The interim review of the progress made in five years of
work in implementing the MDGs shows that it will not be possible to
reach the goals using the conventional instruments of development
financing (Sachs 2005).
IMF and World Bank dealt with the issue at their annual spring
meeting in 2005, and in the meantime an internal analysis has
weighed the pros and cons of the various proposals advanced thus
far (World Bank / IMF 2005). While the report makes no
recommendations, it does point to the political acceptance problems
faced by international taxes. In fact, it is mainly the US that is
adamantly opposed to any international taxes. To cite an example,
in 2005 Washington demanded, successfully, that the term
"international taxes" be deleted from the Final Declaration adopted
by the UN General Assembly.
All the same, the French initiative has now sparked a new dynamic.
A strategy based on a plurilateral approach is proving successful:
starting out with a "coalition of the willing," a lead group paving
the way for and promoting the project, without first waiting for a
universal consensus to emerge. To cite an example, the Paris
conference saw the formation of a "Pilot Group on Solidarity
Contributions for Development," an alliance extending beyond the
hard core of countries that have already declared their willingness
to adopt an air-ticket tax. Thirty eight countries have joined the
group (including e.g. Belgium, Germany, the UK, India, Mexico,
Austria, Spain, South Africa, South Korea). This is an
institutional framework designed to guarantee the continuity of the
process. The group is also open for an involvement of civil
society.
...
What is international about international taxes?
The French air-ticket tax will be levied by the internal revenue
authorities on every airline ticket purchased on French soil. In
this regard the new tax may appear to be just another, normal
national tax. Its innovative elements include the facts that it
- is levied in concert with other countries. It is for practical
reasons only that the course of implementation will be staggered,
with France taking the lead and Chile and Brazil then following
suit. In other words, the first characteristic of an international
tax is that it is adopted simultaneously at least two countries.
The aim of this ticket tax is to continuously raise the number of
players, ideally to include all of the countries of the world.
- is earmarked for an international use, in this case for a
subgoal of the Millennium Development Goals, viz. to combat Aids,
malaria, and tuberculosis.
The tax will be collected on a national basis, and sovereignty over
the use of the revenues will lie with the nation-states concerned.
In other words, international taxes do not necessarily require an
international organization. However, other, more extensive
configurations would also be conceivable. The tax could, for
instance, be collected by a multilateral institution, and decisions
on the use of the revenues from it could be reached on a
multilateral basis. This, though, would call for far more
multilateral integration than we have at present. The EU is now
practically the only place where some rudimentary steps toward such
a higher level of integration have been taken.
Globalization and taxation
The systems of taxation that developed in the course of the 19th
and 20th centuries were conceived for the comparatively closed
economy of the nation-state. Capital and labor were territorially
bound to roughly the same degree. It was relatively easy for
national tax legislation to establish the national tax base.
Globalization has given rise to a new situation. The latter's
economic core may be seen in the fact that national boundaries are
increasingly vanishing for movements of capital, goods, and
services. And in this connection no other factor of production has
proven to be as mobile as capital.
To cite an example, thanks to digitalization and satellite
communication, today some US$ 1.9 per day are transacted in the
international foreign-exchange markets trade (BIS 2005). What we
see emerging here is something similar to the cyberspace of the
Internet, a transnational space. These processes are becoming less
and less accessible to control and regulation.
Globalization as a legitimation for international taxes
The globalization-related erosion of the nation-state's tax base is
not only an economic problem. This development at the same time
strikes at the heart of modern statehood and democracy. A good
measure of democratic sovereignty is being lost because the
sovereign is gradually being deprived of the material means it
needs to shape and sustain the community. If the chronic crisis of
public finances leads to further deterioration of community social
and physical infrastructure, the erosion of democratic policy
spaces and options will also be a consequence.
Hence, international taxes may be seen as democratically legitimate
because they restore to the democratic sovereign - the citizenry -
some of the scopes it needs to give positive shape to life in the
community. ...
Earmarking as a key factor for legitimacy
And last but not least, earmarking revenues from international
taxes for purposes that enjoy a high level of moral authority may
serve to boost the acceptance of such taxes. This is the reason why
advocates of international taxes are in favor of starting out by
using these revenues to finance the MDGs (United Nations 2004).
...
The air-ticket tax
The French air-ticket tax levies a rate of one euro on every ticket
sold for economy-class domestic and European flights. The rate for
business and first class is ten euros. The respective rates for
intercontinental flights are four and forty euros per ticket.
The rationale for the higher rates on business and first-class
tickets is not distributional policy. With 60% of the revenues of
air carriers stemming from these classes, the tax revenues
collected are accordingly high. On the whole, the French government
anticipates revenues from the tax amounting to up to 200 million.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
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