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Contributions from
the Column
Monitor
UN Summit: saving what could be saved
UN summit press review
Commodity exporters enjoy high demand
UNCTAD: Happy times for commodity exporters
Taxing air travel to fund development
Japan to increase aid
Roads and development
Alternative health report for WHO reform
Women have higher crop yields
World Bank: inequality blocks development
10/2005
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[ Development funds ]
Taxing air traffic
Jean-Pierre Landau is amazed that the debate on international taxation has gained such a momentum. “We have come a long way in the past 18 months,” the economist says and goes on to explain that he had expected his work to end up on the shelf when coordinating a specialist report on the matter for French President Jacques Chirac. Instead, the issue of raising funds for development by imposing taxes on financial transactions or on air travel is now on the official agenda of the European Union, the G8 and the Bretton Woods Institutions. Landau, French executive director at the European Bank for Reconstruction and Development, stresses that the approach makes sense in both economic and political terms.
Klaus Töpfer, the executive director of the United Nations Environment Programme, agrees that the time has come to discuss the introduction of global taxes. Until recently, he says, the matter only served as an alibi diverting attention from the need for debt relief as well as from the fact that donor nations never lived up to their old pledge of spending 0.7% of GDP on development. But this has changed, according to Töpfer, as both topics have been dealt with in the past months. The EU has come up with a time frame for reaching the 0.7% goal by 2015 and the Gleneagles summit decided to move ahead on debt relief.
Töpfer is in favour of raising additional money for poor countries: “We shouldn’t discuss development funding in terms of charity or solidarity but in terms of investment.” After all, he argues, rich countries rely on specific services by developing countries without paying anything. Giving an example, the former German environment minister estimates that the contribution of disadvantaged nations’ forests to climate protection is worth an annual sum of $ 60 billion. He stresses that unpaid services are not normally sustained over the long run.
In the view of German Development Minister Heidemarie Wieczorek-Zeul, international taxation makes particular sense as corporate taxes have been sinking the world over. Indeed, she speaks of “a race to the bottom” as countries compete for investment. According to Wieczorek-Zeul, the ability of governments to act is eroding – not only, but particularly so in poor countries. As she elaborated at a conference held by InWEnt and her ministry in late August in Frankfurt, international taxes would contribute to an equitable course of globalisation.
Most economists agree that the theoretical arguments pro and contra international taxation have all been made. Proponents say that the time has come to act. They are in favour of starting pilot projects. For instance, the EU member countries could impose a fee on airplane tickets, as has been proposed by the French president. This pragmatic approach, however, seems somewhat inconclusive to UNEP head Töpfer who expresses himself in favour of taxing the fuel consumed for air travel as that would also relate to the amount of emitted carbondioxid, a greenhouse gas.
Most in the development community agree that international taxes make sense. However, that consensus is not necessarily shared by the general public. Michael Hofmann of the German Development Ministry says that it is not enough to find innovative ways of raising money. Government and civil society actors must also convince tax payers that the money will be made good use of, according to the bureaucrat. Terms like “poverty reduction strategies”, “budget support” and “political cohesion” make sense for development policy, Hofman warns, but they do not convey a clear message to the average citizen of rich countries. In this perspective, the positive momentum gained in international debate may yet be lost if the development community fails to reach out to the general public convincingly. (dem)
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