Global Policy Forum

By Ruthanne Cecil

Tobin Tax in the US Congress
Congressman Peter DeFazio (D-Oregon) will introduce in mid-April a comprehensive Tobin Tax resolution into the US Congress. Expected to be a Joint Resolution (House and Senate), it is the culmination of a participatory drafting process involving dozens of citizens who made suggestions on the wording. Rep.DeFazio incorporated many comments into the final wording. The resolution is due to hit the streets in mid-April during Mobilization for Global Justice week. Teach-ins, meetings, tabling, congressional briefings, and press events are planned. Contact the office of Rep. DeFazio to request a copy.

Alert: Your US congressperson and senators may want to co-sponsor this significant resolution, which sends a message to the US government and other governments, that it is time to cooperate to tame the global casino. Write to ask if they have considered co-sponsoring the DeFazio resolution on the Tobin Tax.

Technical Breakthroughs on the Tobin Tax
First, an important technical report on an experts' meeting:

Dear Colleagues,
The CIDSE (International Cooperation for Development and Solidarity) Task Group on Social Justice is pleased to (release) the report of the expert meeting on "Taxing excessive financial speculation to prevent social crisis" organised by CIDSE in collaboration with the University of Antwerp (UFSIA) last October. The meeting was successful in the sense that it contributed to stimulate a critical discussion on the technical questions related to a tax on foreign-exchange transactions. We refer you in particular to the general conclusion and the summary of the report. We hope you will find this report of interest and encourage you to share it with other interested colleagues.
- Eva Hanfstaengl, Advocacy Officer, CIDSE

Excerpt from A Tax on Foreign-Exchange Transactions
Report of a Consultation held by CIDSE in collaboration with the University of Antwerp, October 22, 1999.

A Currency Transactions Tax (CTT) of the form usually discussed could very probably be reliably collected through the foreign-exchange-settlement system, and, if all major countries, or even the four or five authorities issuing the major vehicle-currencies, agreed to impose it at a uniform rate of the order of 0.05% to 0.1%, it could probably raise sums of the order of $75-200 billion a year or more.

A strong case on grounds of justice could be made for devoting a large proportion of this sum (the great bulk of which would be collected by the authorities of a few rich countries) to the fight against world poverty or to other global purposes such as peacekeeping.

But, to encourage general participation, which would be desirable in order to guard against the eventual development of vehicle-currencies outside the system, each participant should by agreement keep a certain part of the amount collected. That part would need to be defined in some equitable way - for example as some function of (a) the amount collected and (b) a certain fixed amount (say $5) per head of population.

At such low rates it would probably reduce short-term speculative foreign-exchange transactions somewhat, while having very little effect on international trade in goods and services or long-term investment. This differential reduction in short-term speculative foreign-exchange transactions in itself would very probably decrease general exchange-rate instability to some extent. But, in the simple form in which the CTT has usually been discussed (a single, very low, uniform rate), the tax would probably have little impact on the major speculative flights of currency that have been among the most disturbing economic phenomena of the 1990s.

However, a two-tier CTT - with a second, much higher, penal rate to be applied (a) temporarily, (b) under prior announcement, (c) on objective criteria, to transactions in any currency whenever the exchange-rate of that currency had changed at more than a certain velocity - could be used with every prospect of success to prevent sudden speculative flights of currency. (Editors' note: This is the so-called Spahn version of CTT's, named for Paul Bernd Spahn) The mere fact that such a mechanism was known to be in place would very probably prevent any such speculative rush from beginning, so that the higher rate might never have actually to be applied. (a)This would not block useful exchange-rate adjustment. (b)It need also not reduce in any way a country's autonomy in exchange-rate policy.

It is not the only plausible way in which such crises might be avoided; but (a) it is superior in a number of ways to conventional exchange-controls; (b) more confidence might be placed in it than in Chilean-type fiscal disincentives to short-term-capital imports, useful as these might be if imposed well in advance of a potential crisis and applied to all inflows;and (c) it seems more likely politically to be offered, and more credible if promised, than an undertaking from the outside world to intervene massively in the currency markets (by buying any threatened currency) in order to prevent over-rapid exchange-rate changes.

It could in principle be applied unilaterally by a country to defend itself from speculative currency flight; but an international arrangement would probably inspire more confidence. All the device requires is that the mechanism for collecting a CTT be set up. The regular lower-tier rate might be very low or zero without preventing the threat of a higher rate from blocking speculative currency flights.

Given the uncertainty about the effect of a CTT on the volume of foreign-exchange transactions, the lower tier should be introduced initially at a very low rate - and then raised gradually as and if raising it appeared to be justified by the effects (or lack of effect) on the volume and pattern of currency trading. With a rate of 0.01%, revenue raised would probably still be substantial. After observing the effect of a tax at that rate, the governments concerned could proceed from there to increase the lower tier as seemed appropriate, and so probably to provide, if they chose, very substantial sums for such global purposes as social development, peacekeeping and environmental protection.
- Anthony Clunies Ross, Kinbuck, Perthshire, Scotland; 2 February 2000 (for full document, see www.cidse.be)

Also included in the CIDSE report is a highly readable summary of the technical work of Rodney Schmidt, a breakthrough in the debate on Tobin Tax enforcement. Schmidt was invited to meet with UK Treasury officials, during a visit arranged by War on Want. They report:

Treasury told that Tobin is practical and workable
Expert economist and former advisor to the Canadian government Rodney Schmidt gave the Tobin Tax a big boost in Europe, including the UK, this autumn. Dr Schmidt, at a series of War on Want sponsored meetings in London, argued a convincing case for the implementation of a foreign exchange tax. In meetings with government officials and advisors Dr Schmidt showed how, due to changes in technology and banking practices, a Tobin Tax would be relatively easy to impose. "The tax would require no new infrastructure and would be cheap to impose", he said. Dr Schmidt says the Tobin Tax would apply to all deals through the settlement system, which tracks every single trade and would be unavoidable. This proves that evasion of the tax and the establishment of 'Tobin Tax havens' are both an impossibility.

After meeting NGOs and academics in the UK, Dr Schmidt flew to Antwerp where he addressed an audience of Tobin Tax 'experts' from around the globe. His paper on the feasibility of the Tobin Tax is available from War on Want.

Tobin Tax Motion Passes In Canada's Parliament

On March 23, the Canadian House of Commons in Ottawa passed Motion M-239 by a vote of 164 to 83:

"That, in the opinion of the House, the government should enact a tax on financial transactions in concert with the international community." Finance Minister Paul Martin and most of the governing Liberal party supported the opposition New Democratic Party in favour of the Motion.

The "Tobin Tax" is named after Nobel prize winning economist James Tobin of Yale, a former economic advisor to President Kennedy, who first proposed it over 20 years ago. The concept has continued to gain supporters over the years. Tobin proposed that a small tax of between .1 and .5 per cent on currency exchange transactions would serve two purposes. It would limit the damage from excessive exchange rate volatility (ie. the recent crises in Asia, Russia, and Brazil), as well as raising significant revenue for global causes. With global foreign exchange revenues over $1.3 trillion per day, estimated revenue from the Tobin Tax is in the range of $150 to $300 billion per year.

By comparison, the U.N. estimate of funding required for universal access to basic social services (ending poverty) is $40 billion per year.

Canadian Finace Minister Paul Martin is currently senior finance minister at the G-7. Obviously support from other G-7 countries, expecially the U.S., is critical to make real progress on this issue. The climate in Europe is more today for a Tobin Tax is more favourable than ever before, so U.S. support is more critical than ever.

-Blaise Salmon, RESULTS Canada

Near Victory in the European Parliament plus a Special Report on European Activism
On Thursday 20 January 2000, a resolution signed by the PES, Greens, GUE and Liberal groups, which would have called upon the (European) Commission to submit a report within six months into how a Tobin tax might be introduced, was rejected by only 4 votes out of 400 in the European Parliament.

The "Capital Tax, Fiscal System and Globalisation" Intergroup (of parliamentarians) regrets the rejection of this resolution. However, the intergroup is satisfied that a debate on the Tobin tax has been able to take place during a plenary session. Upon the conclusion of this debate, 225 deputies supported the resolution.

The debate on the Tobin tax, the regulation of capital movements and of the damage caused by financial speculation, is spreading across the European Union and will have to be pursued within the European Parliament. The intergroup will continue to contribute and to present new initiatives in this respect over the coming weeks.
- Glyn Ford and Harlem Désir (Members of European Parliament); News From War on Want

Tobin Tax in the French Parliament - update from an ATTAC member
An amendment was pushed into the budget law. It was not voted at a late night session (the government chose the hours for this amendment to be discussed). Then as all the law in France it was discussed in the Senate and then again not voted(a long and interesting debate). The second hearing in the National assembly then after was similar to the first one. But the government itself agreed to put the question in its agenda for the presidency of the EU in 2000 to put through a feasibility study.

In fact that's a victory although not very much visible. Last year before ATTAC a representative tried to put through an amendment concerning this idea. The government dismissed it without any problem and without any counter measure. This year its the government itself that proposed a counter measure in the form of an amendment that acknowledges the importance of the question and propose it to be studied officially. (I have a dream, like one of your great national figures said, to have this amendement discussed simultaneously in different parliaments. For now we are going one after another.)
- Laurent (France).

In the UK
News from Harry Barnes, Labour MP for North East Derbyshire
Labour MP Harry Barnes is today (24 January) tabling a cross-party Commons motion, supported by members from 4 political parties and including two former Ministers, urging the Government to investigate the increasingly popular notion of taxing international currency speculation. The motion and supporters, so far, are below.

The Tobin Tax
That this House notes that international currency speculation currently stands at about $1.5 trillion a day and that the vast majority of this is unrelated to trade in real goods and services; further notes that such enormous speculative flows substantially undermine the powers of national governments and regional blocs; believes that a small levy on such speculation, known as the Tobin Tax after the name of the Nobel Laureate who originated the concept, could both help to dampen down the scale and scope of speculation and raise substantial revenues, raising as much as $250 billion each year for good causes such as development and environmental protection; recognises that such a levy would have to be universal or as near to that as possible and contain safeguards to minimise and eliminate tax evasion; notes that the Tobin Tax has the backing of the Canadian Parliament, the Finnish Government and campaign groups such as War on Want; and urges the Government to discuss the concept with its partners in international organisations such as the World Trade Organisation, the IMF, G8 and the European Union with a view to drawing up an internationally co-ordinated and feasible tax regime for currency speculation.

Harry Barnes; Tony Worthington; Tess Kingham; Andrew Stunell; Nigel Jones; Peter Bottomley; Dafydd Wigley; Norman Godman; Ann Cryer; Maria Fyfe; Alan Simpson; John Austin; Ken Livingstone; Lynne Jones; Bill Etherington; John McDonnell; Julia Drown; David Chaytor; Ian Gibson; Ernie Ross

Report from a major European ATTAC meeting, March 4,Paris.
Impressions of the Irish delegate (excerpts from Sand in the Wheels No. 24, March 15, 2000, ATTAC newsletter).

On behalf of Attac-Ireland, I was eager to travel to Paris on the 4th of March and meet our European colleagues, first, to put a face on names we knew and then to meet new friends with whom we had had no links so far. Of course, as Bernard Cassen had put it, I was "conscious of the necessity to organise an increased European coordination of the movements which are fighting the negative effects of neo-liberal globalisation and want to find alternatives to it." Bernard Cassen's call was two-pronged: it was a call for organisation and a call for action.

Each group was then called upon to describe itself and its activities. It was a fascinating session.

In Germany, about fifty organisations are in the process of setting up a network for the democratic control of financial transactions. These organisations include World Economy, Ecology and Development (WEED), Pax Christi, Kairos and Share. However, no unions are involved as yet.

Belgium was wonderfully dynamic, with several Attac groups including four university based ones. The movement is driven by local activists and does proximity work through - for instance - information stalls in markets.

The interest in Greece focuses mainly on the Tobin Tax, though financial journalists are generally negative towards it. Given the proximity of the legislative elections, the movement is keen to avoid being too closely associated with any political party, although in Greece politics and activism are traditionally linked.

In Ireland, while we work with other NGOs on issues such as opposition to the WTO, we are essentially a citizens group and our own specific work is on the Tobin Tax. We produce a newsletter and have our own web-site.

I was full of admiration at the "spunk" of Attac-Luxembourg! I thought we, in Ireland, were daring until I met them. Imagine trying to promote the Tobin Tax in a country with no university but with 300 banks! Obviously, no trade union has yet joined the movement and the biggest challenge for the group will be to suggest alternatives to financial activities in the country. Undaunted, they pursue their educational work through a presence in the streets and in the media. Hats off!

There is no Attac group as such in the UK but, although Britain is the country of the neo-liberal consensus, many groups are active on single issues: Jubilee 2000 on Third World debt, War on Want on the Tobin Tax or the Anti-Globalisation Network.

The Dutch group of Attac had its first meeting in November. It regroups individuals who are members of NGOs or academics and it concentrates its action on issues of taxation, the liberalisation of capital flows, the accountability of shareholders of enterprises.

Switzerland, the seat of banks, insurance companies and multinational companies is also the seat of many Attac groups. Attac is present in every canton of the federation and active on issues as varied as the taxation of capital, actions against the WTO, privatisations, the abolition of the South-African debt, pension funds, the condition of women or the campaign against the closure of local post-offices.

Harlem Desir, MEP, introduced the three groups which, within the European Parliament, are working on "Attac issues". One works on the WTO, another on financial speculation and the third is an actual Attac group, based in Strasbourg.

Confronted by a change in panorama, the challenge is for us all to co-ordinate our actions and first of all to identify the points on which we are united: the rejection of inequalities, the protection of the environment, the defence of democracy.

- Claudine, Attac-Ireland, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

A Tobin Tax mobilization in Germany
About 100 representatives of social groupings call for the Tobin tax and the abolishment of offshore-centres (Frankfurt, January 22, 2000)
About 100 representatives of non-governmental organisations, social movements and church-related groups from Germany, Switzerland and Austria established a network for democratic control of international financial markets. The meeting which was organized by German NGOs such as WEED, Kairos Europa and Pax Christi was a first step to start a campaign in German speaking countries around this issue. A broad consensus emerged that there was need of an intensified public debate in Germany, of a countrywide educational effort and of specific advocacy work on the topic. For further information contact: KAIROS Europa, WEED, http://www.share-online.de/Finanzmaerkte

Announcing a New French Campaign
The Morsang Appeal, a multi-issue platform for local jurisdictions and municipalities that includes the Tobin Tax, already has 47 cities who have signed the appeal. This new ATTAC campaign, mostly in France, is emphasizing the role of local communities is building support for global concerns. They have coined a new word: Glocal!

Swiss NGOs Support the Tobin Tax
See the press announcement in French and German.

Action on two UN PrepComm's; and the IMF
The Preparatory Committee for Copenhagen Plus 5
Halifax Initiative, along with NGO members of the Canadian delegation to the Social Summit negotiations, will be circulating a letter for sign on to NGOs around the world early next week. New language on currency transfer taxes has been proposed by the Canadian delegation and the letter offers support and encouragement to the delegates who will be debating it and reflects our solidarity. A fuller explanation will follow. For more information, contact Halifax Initiative.

I am an international NGO member of the Canadian government delegation to the Preparatory Committee for the WSSD +5 or UNGASS Geneva 2000. At the February Intersessional meeting we succeeded in getting our Dept. of Finance to authorize testing wording to be added to para. 10 of the key document, L.5 rev. 2, which would read:

10: Reduce negative impacts on social development of international financial turbulence by such possible polices as: a) improved measures to address the excessive volatility of short-term capital flows, including inter alia i) temporary debt standstills to provide countries with some breathing space to negotiate with creditors in an orderly fashion and ii) further study of the feasibility of a currency transfer tax.

Before the PrepCom resumes in New York, April 3, we are attempting to get as much international support as possible for this initiative, particularly ii) which is the furthest we have gotten in getting our government to publicly advocate a Tobin or related tax. Are there initiatives which your project/network might undertake to support this small but important if tentative step forward? U.S., Japanese and other OECD opposition is likely, but we would like to soften, neutralize or reverse it wherever possible.
Yours sincerely,
John W. Foster (Dr.); Canadian Consortium for International Social Development

The Preparatory Committee for the High Level International Intergovernmental Event on Financing for Development
During March, the Bureau will continue consultations with all stakeholders and formulate a report with recommendations for the Preparatory Committee on the modes of participation of the World Bank, IMF, and WTO in the preparatory process and the final event. The on-line questionnaire on modes of participation for all stakeholders remain open on the FFD website. In addition a selection of the replies received is also available on the website. The full Preparatory commitee will meet from 27-31 March
- DESA Secretariat (Visit the FfD website)

Excerpts from CIDSE alert:

Dear Colleagues,
The UN Development Policy Analysis Division (Department of Economic and Social Affairs) has recently prepared a questionnaire on financing for development.

The results of the questionnaire will help the Financing for Development Preparatory Committee to define the agenda for the final event. In this respect, question N°1 is the most important one. It is crucial that as many NGOs as possible fill in this questionnaire in order to identify the right issues e.g. ODA, debt relief, preventing international financial crisis and excessive financial volatility, special needs of Africa, innovative sources of financing (f.i. taxation, Tobin-type tax). There is a risk otherwise that governments and the private sector will dominate the agenda.
- Eva Hanfstaengl, Advocacy Officer, CIDSE Secretariat, Belgium

IMF - starting to get it?
In late January the IMF issued a 60-page report concluding that capital controls - government limits on cross-border money flows - are sometimes useful to create breathing space for countries, but should not be a way of avoiding economic reform. According to an AP story of Jan 11, 2000, the report was "one more step the 182-nation lending agency has taken away from its previously held strong opposition to the use of capital controls." (Associated Press, January 11, 2000)

Canada, after one year
On March 23, 1999, an exuberant Parliament passed a motion to "enact a tax on financial transactions in concert with the international community" with all party support by a resounding 164-83 margin. The motion was a strong message from Parliament that the political must regain control of the financial in the interests of the world's common wealth. One year later, we have little progress to report. While the Canadian motion has sparked debate in Parliaments around the world, there has been little action at home. There have been no public hearings, no follow-up studies, no meetings of experts, in short, no substantive action to move the agenda forward either domestically or internationally.

Without continued public pressure, this motion may vanish from the political map, even as Parliaments around the world begin mobilizing in support of the Tobin tax. Remind the Canadian Parliament that the work only starts when the vote is taken. Join our Tobin Anniversary Campaign. Thanks for your efforts to hold our elected members' feet to the fire.
- Robin Round, Halifax Initiative. For further information visit our new website.

New USA alliance on taxing speculation
The Tobin Tax Initiative-USA is joining with several other organizations and individuals to form a USA alliance to tax speculation. Called TSAN (Tax Speculation Action Network), it will hold its first strategy meeting in Washington DC at the end of March. Plans are to design the US campaign on the Tobin Tax, congressional action, grassroots mobilization, framing the issue, the media, information materials, and other necessary aspects of campaign mobilization. A domestic alliance, TSAN will act in solidarity with efforts internationally to tax excessive speculation.

Individuals and groups involved include, among others: Global Exchange;EarthAction; Seventh Generation Fund; Just Act: Youth Action for Global Justice; Rainforest Action Network, the steelworkers' Alliance for Sustainable Jobs and the Environment; the AFL-CIO Public Policy Department;Institute for Agriculture and Trade Policy; 50 Years is Enough National Network; National Lawyers Guild; Center for Economic and Policy Research; Economic Justice Now; and more.

Global Policy Forum, home of the world's best website, has a huge section on the Tobin Tax and other forms of multilateral or cross-border taxation. GPF, located next to the UN in New York, monitors UN activity and reports on NGO international policies and proposals. Their website has received over 5 million hits! For lots of pages and articles on Tobin-style taxes and related proposals, hit the Global Taxes button at www.globalpolicy.org

A Tobin Tax leader gets the Pulitzer. Ross Gelbspan, the coordinator of an active US organization, the World Energy Modernization Plan, received the Pulitzer Prize for his book, The Heat is On, about global climate change, the oil industry cover-up, and positive solutions to the global warming problem. For WEMP's work on promoting the Tobin Tax as a revenue proposal to fund the transition in developing nations to safe, renewable energy, see www.wemp.org

Welcome to CEPR, the new arm of Preamble, Washington DC, who have begun a project on taxing speculation. CEPR are co-founders of the new TSAN (Tax Speculation Action Network). Here are excerpts from their recent work on financial transaction taxes (FTT's, which include Tobin-style taxes on currency).

Dear colleagues:

The Center for Economic and Policy Research, a not-for-profit research and educational institution in Washington, DC, along with the Halifax Initiative in Vancouver, Canada, is conducting a program of research and education on the benefits of a small tax on financial transactions to discourage speculation, increase the efficiency of financial markets and the tax system, raise revenues, and shift the burden of taxation away from the bottom of the income distribution.

Concerning the paper (excerpts below), we would like to know if you find it useful. While some of the details of the paper are specific to the context of the United States, the argument is more general. We would be pleased to work with organizations in different countries to adapt the arguments to different national contexts. (See full document)

Taxing Financial Speculation: Shifting the Tax Burden From Wages to Wagers
by Dean Baker, CEPR, Executive Summary

The vast majority of stock trades and other financial transactions are done by short term traders who hold assets for less than a year and often less than a day. These trades are essentially a form of gambling. This paper proposes a modest tax on these trades, 0.25 percent on the sale or purchase of share of stock, along with comparable fees for other assets such as bonds, futures, options, and foreign currency. Such a tax would leave long-term investors largely unaffected, but impose a significant tax on speculators. This tax could raise more than $120 billion a year in revenue.

The tax could allow for a 40 percent tax cut in the income taxes paid by typical working families. For example, in a tax proposal laid out in this paper, a single worker with an income of $12,000 could get a tax cut of $280. A family with 2 children and an income of $20,000 could see an $800 increase in the size of their earned income tax credit, and a couple with two children and an income of $50,000 could see a tax cut of $1,900.

Alternatively, the revenue could be used to meet some of the nation's unmet social needs. The revenue collected through such a tax is more than one third the size of the entire domestic discretionary portion of the federal budget: this portion of the budget is currently projected to shrink by almost 30 percent over the next decade, as a share of GDP. Revenue from a tax on financial transactions can allow the government to maintain and increase its spending on education, health care, child care and vital programs.

By reducing the volume of speculation in financial markets, this tax could enhance financial stability. The last decade has seen many ruinous collapses in international financial markets, most recently in the stock markets and currencies of Brazil, Russia, East Asia. Insofar as this tax reduces speculation that creates the conditions that lead to such financial crises, it will produce more stable even growth worldwide.
- by Dean Baker, economist, CEPR.

New resources on Tobin Tax
Don't miss the Jan/Feb 2000 issue of the New Internationalist, which features an excellent article "It's Time for Tobin", by Robin Round, a second article about the growing ATTAC movement on the Tobin Tax in the context of globalization, and a very colorful Tobin Tax poster!

CIDSE report is a must-read for the latest technical arguments on CTT's - domestic versions of Tobin-style taxes - called Currency Transaction Taxes. The CTT approach provides the most politically possible way to tame the foreign exchange. The report also discusses the work of Rodney Schmidt, ground-breaking information on feasible enforcement of the Tobin Tax by collecting at settlement sites instead of the dealer sites. Check out the entire report, or order it.

War on Want now has two excellent studies. "The Global Gamblers" describes the banks doing the speculating, and "Costing the Casino" describes the impact of speculation on the world's poor, in the countries that are hit. Order them both.

National Radio Project has a new tape that covers all the major issues on globalization, and is an excellent teaching tool. It includes a short concluding piece on the dangers of currency speculation, and the Tobin Tax. Order $10 tapes, "Globalization: Voices of Resistance". Or mail This e-mail address is being protected from spambots. You need JavaScript enabled to view it