Global Policy Forum

UN High Level Panel on Financing for Development
Currency Transaction Taxes

By Robin Round

Abdulatif Al-Hammad, President, Arab Fund for Economic Development, Kuwait
David Bryer, Director of OXFAM, United Kingdom
Mary Chinery-Hess, former Deputy Director-General of the International Labour Organization, Ghana
Jacques Delors, former Finance Minister of France and former President of the European Commission
Rebeca Grynspan, former Vice-President, Costa Rica
Majid Osman, former Finance Minister of Mozambique
Robert Rubin, former Secretary of the Treasury, United States
Manmohan Singh, former Minister of Finance, India
Ernesto Zedillo, former President of Mexico

March 2001

Dear Members of the UN High Level Panel on Financing for Development,

We, the undersigned non-governmental organizations, welcomed the announcement by the UN Secretary General, in December 2000, of a High Level Panel on Financing for Development. Through its analysis and recommendations, we believe your panel has the potential to help shape the debate in the preparatory processes leading to the International Conference on Financing for Development in 2002.

One of the newest and most innovative methods to generate new resources for development involves the regulation and taxation of international capital flows. Currency transactions taxes, adopted nationally and coordinated regionally or internationally, provide a means by which unstable and untaxed capital can be re-regulated in the interest of financial stability and revenue generation for development.

The financial crises of 1997 1999 revealed the degree to which financial markets are under-governed in the global economy. An enormous discrepancy exists between an increasingly sophisticated international financial world and the lack of proper institutional frameworks to regulate it at the national and multilateral levels. The inevitability of future crises makes the re-regulation of capital a global imperative.

A market-based alternative to regulatory capital controls are currency transactions taxes, modeled after a proposal by Nobel-prize winning economist James Tobin in 1978. Tobin proposed "an internationally agreed uniform tax (1%), administered by each government over its own jurisdiction" on all foreign exchange transactions in order to "throw some sand in the wheels" of speculative flows.

Tobin's original proposal raised a number of technical concerns associated with the difficulty of collection, evasion through asset migration or substitution, universality of application, rate efficiency, and effectiveness during times of crisis. Recent proposals by economist Rodney Schmidt (1999, 2000(2)) and Paul-Bernd Spahn (1996) have made significant technical improvements on Tobin's proposed methodology while remaining true to his concept. Their work demonstrates the technical feasibility of currency transactions taxes. You will find copies of these papers attached to this letter for your information and analysis.

Over 80% of the global daily foreign exchange turnover are speculative transactions. These comprise transactions into and out of a currency in a week or less as banks, investment houses and hedge funds exploit small profit margins in stock, bond and currency markets. Currency transactions taxes would automatically penalize the short-horizon exchanges, while negligibly affecting the incentives for goods and services trading and long-term capital investments. Productive investment would further benefit by reduced exchange rate risk and hedging costs.

An unintended benefit of Tobin's original proposal was the enormous revenue that could be generated by it. Even with reduced tax rates, an estimated 33% percent shrinkage in global foreign exchange volume and additional reductions for exempted official trading and evasion, widely adopted currency transactions taxes could generate between US$ 97-300 billion annually (1996 estimate). In 1998, the United Nations Development Programme estimated that 40 billion US dollars per year for ten years would be enough to guarantee access to basic social services and adequate food, water and sanitation to every person on the planet. A coordinated multilateral system of redistribution of a portion of receipts from currency transactions taxes could eliminate the worst forms of poverty globally.

Political support for currency transactions taxes is growing globally. In June 2000, over 160 governments agreed to undertake a study which would include the feasibility of currency transactions taxes at the UN Social Summit in Geneva. In March 1999, Canada became the first Parliament in the world to pass a motion calling for taxes on financial transactions by a resounding 2:1 margin with all party support. The UK, French, Belgian, Brazilian and European Parliaments have held parliamentary debates or hearings on such taxes. Over 500 Parliamentarians have indicated support for currency transactions taxes as have several prominent Ministers in OECD countries.

We urge your careful consideration and thorough evaluation of currency transactions taxes as new and innovative means of mobilizing funds for development. Until measures are enacted to prevent systemic financial market volatility by curbing the destabilizing speculation that fuels it, human development will be threatened. The revenues from currency transactions taxes represent a significant new source of public finance for world development at a time when commitments to bilateral and multilateral development assistance are in decline and income disparity and social inequity are on the rise globally. Currency transactions taxes represent a rare opportunity to capture the enormous wealth of an untaxed sector and redirect it toward global public goods.

You have been given a critical opportunity at a critical time. We encourage your work and offer ourselves as resource persons should you require additional information. We appreciate very much the attention that you will give to this letter and look forward to the public release of your report.

Yours sincerely,

Association for the Taxation of Transactions to Aid Citizens (ATTAC) Mendoza, ARGENTINA

Doug CAMERON, National Secretary, Australian Manufacturing Workers Union, AUSTRALIA

Christian FELBER, Karin KUEBLBOECK, Speakers, ATTAC Austria, AUSTRIA

Mieke MOLEMANS, President, Jozef De WITTE, General secretary, 11.11.11 Coalition of the Flemish North South Movement, BELGIUM CTT EXPERT EMAIL CONTACT: Mr. Rudy DeMeyer, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , Mr. Frans Teuchies, frans.teuchies@ 11.be

Luc CORTEBEECK, President, ACV-CSCN (Belgian Christian Trade Union), BELGIUM

Xavier VERBOVEN, Intergewestelijk Secretary ABVV, Vlaams ABVV BELGIUM

Luc DELANGHE, President, Worldsolidarity (WSM), BELGIUM

Atila ROQUE, Coordinator of Public Policies and Globalization IBASE, (Brazilian Institute of Economic and Social Analysis) BRAZIL, CTT EXPERT EMAIL CONTACT: Mr. Fernando Cardim de Carvalho, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

John MIHEVC, Chair, Halifax Initiative, CANADA, CTT EXPERT: Ms. Robin Round, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

James CLANCY, National President, National Union of Public and General Employees, CANADA

Rieky STUART, Executive Director, OXFAM Canada, CANADA

Blaise Salmon, President, Jean-Francois TARDIF, National Coordinator, RESULTS CANADA, CANADA CTT EXPERT EMAIL CONTACT: Mr. Blaise Salmon, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Joanna KERR, Executive Director, Association for Women's Rights in Development, CANADA/USA

Aida Jean N. MANIPON, Executive Director, Asian Regional Exchange for New Alternatives (ARENA), CHINA (HONG KONG)

Janice Goodson FOERDE, Chairperson, K.U.L.U. - Women and Development, DENMARK

Simon STOCKER, Director, Eurostep, EUROPE

Folke SUNDMAN, Executive Director, Service Centre for Development Cooperation (KEPA), FINLAND

Katarina Sehm PATOMAKI,Executive Secretary, Network Institute for Global Democratization, NIGD, FINLAND/UK

Francoise VANNI, Director, Agir ici, FRANCE

Jean-Claude BUCHOTTE, Commission IFI/Collective NGO, Amnesty-International, FRANCE

Bernard CASSEN, Président, ATTAC France, FRANCE

Franí§ois-Xavier VERSCHAVE, Président, SURVIE, FRANCE

Manfred SCHIESS, Chairman, Aktion Partnerschaft Dritte Welt Karlsruhe e.V., Active Partnership with the Southern Hemisphere, GERMANY

Wilhelm VOLKS, Director, INKOTA-netzwerk, GERMANY

Dr. Richard BREMS, Chairman, One Dollar for Everyone Campaign, GERMANY, CTT EXPERT EMAIL CONTACT: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Peter WALDOW, WEED (World Economy, Ecology and Development), GERMANY

Sabina SINISCALCHI, Secretary General, MANI TESE, ITALY

Ethel M. HOWLEY, Main NGO Representative, School Sisters of Notre Dame, ITALY/USA

Ciaran McKENNA, ATTAC Ireland, IRELAND

Justin KILCULLEN, Director, Trócaire, IRELAND

Elio A. Villaseñor GOMEZ, President of the DECA Equipo Pueblo Assembly, Desarrollo Educacion y Cultura Autogestionarios Equipo Pueblo, A.C., MEXICO

Laura Frade RUBIO, Regional Coordinator, Women's Eyes on the Multilaterals Campaign for the Latin America Region, MEXICO

Marí­a Arcelia Gónzalez BUTRN, Coordinadora Nacional, Coordinación Nacional de Organismos Civiles Milenio Feminista, MEXICO

Arjun K. KARKI, President, Rural Reconstruction Nepal-RRN, NEPAL

Theo RUYTER, Vice-President, ATTAC-Nederland, THE NETHERLANDS CTT EXPERT: Mr. Wiert Wiertsema, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Sjef LANGEVELD, Executive Director, Both ENDS, THE NETHERLANDS

Sturla STLSETT, President in Church of Norway Commission on International Affairs, Church of Norway, NORWAY

Morten ERIKSEN, Managing Director, The Norwegian Forum for Environment and Development, NORWAY

Muhammad Shoaib AKBAR, President, Progressive Research Institute of Socio-Economics (PRISE), PAKISTAN

Filomeno S. STA. ANA III, Coordinator, Action for Economic Reforms, PHILIPPINES

Joel I. RODRIGUEZ, President, FIAN-Philippines Executive Director/ Management & Organizational Development for Empowerment(MODE), PHILIPPINES

Brian ASHLEY, Alternative Information & Development Centre (AIDC), SOUTH AFRICA

LEE Seog Yeon, Secretary-General, Citizens' Coalition for Economic Justice (CCEJ), SOUTH KOREA

Marí­a López VILLALBA, ATTAC Andalusia, SPAIN

Peter N. PROVE, Office for International Affairs and Human Rights, Lutheran World Federation, SWITZERLAND

Werner Peter LUEDEMANN, Executive Director, International Association for Human Values, SWITZERLAND

Bruno GURTNER, Senior Economist, Swiss Coalition of Development Organizations, SWITZERLAND

Duncan MacLAREN, Secretary General, Caritas Internationalis, VATICAN CITY CTT EXPERT: Mr.Jacques Bertrand, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Angela WOOD, Economic Policy Officer, Bretton Woods Project, UK

John M. BUNZL, Director, International Simultaneous Policy Organisation (ISPO), UK

Catherine MATHESON, Executive Director, War on Want, UK CTT EXPERT: Mr. Steve Tibbett, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Soren AMBROSE, Policy Analyst, 50 Years Is Enough Network, USA

Ryan HUNTER, Coordinator of Global Trade Working Groups, Alliance for Sustainable Jobs and the Environment, USA

Daniel M. IHARA, Ph.D, Executive Director, Center for Environmental Economic Development, USA CTT EXPERT: Ruthanne Cecil,J.D., This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Lois BARBER, Executive Director, EarthAction, USA

Florence DEACON,Director, New York Office, Franciscans International, USA

Peter MONTAGUE, Director, Environmental Research Foundation USA

Kevin DANAHER, Co-Founder, Global Exchange, USA

James A. PAUL, Executive Director, Global Policy Forum, USA

Mark RITCHIE, President, Institute for Agriculture and Trade Policy, USA

Rev. Seamus P. FINN, Director Justice, Peace & Integrity of Creation, Missionary oblates of Mary Immaculate, USA

Raymond C. OFFENHEISER, President, Oxfam America, USA

June ZEITLIN, Executive Director, Women's Environment and Development Organization (WEDO), USA

James E. WINKLER, General Secretary, General Board of Church and Society of The United Methodist Church, USA

Lawrence CORREA, Co-chairperson, Vivat International, USA

Celita ECCHER, Coordinadora General, REPEM, URUGUAY

Daisy HERMAN, Secretary General, FIMARC, INTERNATIONAL