Global Policy Forum

This recommendation was prepared by a working party consisting of the following members of the Council: Prof E.W. Hommes (chairman), Ms mr dr C.E. von Benda-Beckmann, Prof G.A. de Bruijne, A.R. Coppes, Dr M.P. van Dijk, Prof H.M. de Lange, Prof W. Tims, Prof J.W. Schoorl.

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

1 FEWER AID FUNDS AVAILABLE FOR INTERNATIONAL PROBLEMS

2 TERMINOLOGY: COMMONS, PUBLIC GOODS AND GLOBAL PROBLEMS

3 INSTRUMENTS FOR FINANCING A GLOBAL FUND

3.1 Acceptance of an international tax

3.2 Taxing the commons

3.2.1 The resources of the sea

3.2.2 Tax on air and sea traffic

3.2.3 Taxes on telecommunications

3.2.4 Taxes on the arms trade and the production of weapons

3.2.5 Energy tax: carbon and kerosene tax

3.2.6 Environmental taxes

3.3 Compensation for trade restrictions

3.4 Taxes on capital flows: the Tobin tax

3.5 Fund­raising

3.6 Privatisation of certain UN activities

3.7 Other sources of funds for the general global fund

3.7.1 Capturing the peace dividend

3.7.2 Depositing money saved on subsidies in the general global fund

3.7.3 Global income tax

3.8 Tapping the resources of the Bretton Woods institutions

4 PRACTICAL MATTERS

4.1 Who should impose the taxes?

4.2 What should the funds be used for?

4.3 How is it to be organised?

4.4 How should the money be distributed?

4.5 How are these ideas to be introduced?

4.6 How should the funds be managed?

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

The statement that the world is getting smaller is gradually becoming something of a cliche. The fact that an increasing number of problems can no longer be tackled at a national level is, however, a reality with implications that are not always immediately obvious. The problems of environmental degradation and population have a clear international context, but in the case of poverty, employment and social disintegration this may be less overt, despite the fact that all three can lead to international migration. In recent years, the United Nations has organised a series of high-level conferences at which serious problems have been discussed on a global scale. In 1992 in Rio de Janeiro, the focus was on the environment; in Cairo (1994) the theme was population and development; in Copenhagen (1995) it was poverty, unemployment and social disintegration and in Peking (also in 1995), the topic was the position of women.

These conferences have attempted to reach international consensus on a policy to tackle global problems, a process set in motion by the collapse of the bipolar system of the Cold War era. It is an ambitious political process, which is lagging a long way behind the globalisation now taking place in the world economy. At the same time, paradoxically, there is increasing scepticism about the ability of international organisations to address these problems. The environment conference in Rio de Janeiro is, however, an example of the political process taking the lead and attempting to create a legal order in which globalisation can proceed in a responsible manner.

The United Nations is being forced by the international community (i.e. the member states) to bear growing responsibilities for which it is not equipped. It has neither the organisational structure nor the power and, more particularly, it does not possess the required financial resources. Nor is the problem restricted to the United Nations. The Bretton Woods institutions (the World Bank and the IMF) are increasingly confronted with financial problems. Consequently, their leading role in the international community is declining at a time when, given progressive globalisation, it should be expanding, according to the Council.

There is a risk that the results of the conferences mentioned above will not be implemented. One reason for this is a shortage of financial resources. Many funds were pledged at Rio, but very little money has actually been forthcoming, while in Copenhagen the funding of the agreed proposals, was discussend, but no concrete figures were mentioned. This gives the conferences a somewhat non-binding nature.

This report is not, however, specifically concerned with the financial problems of the United Nations. It focuses on the wider issue of how funds can be made available to tackle a number of global problems. The costs could, for example, be borne jointly by the United Nations, the Bretton Woods institutions and other global institutions. The question to ask is what problems can be solved only by a global organisation and a guaranteed system of funding? The issue is essentially one of subsidiarity - at what level can these problems be tackled most effectively? A second question to be addressed is whether there should be a single joint fund for the various problems or whether the answer lies in separate funds, as has been proposed for the environment.

In this report some mechanisms of global taxation are viewed, such as a taxation on air tickets and kerosene, on weapon sales and production, on the use of the oceans, a tax on capital or an international turnover tax (the Tobin tax) and a global progressive income tax. Other innovative ways of financing are also discussed like the privatisation of certain UN activities, capturing the peace dividend and tapping the resources of the Bretton Woods institutions. The Council recommends to deposit the purchase of these taxes into four specific funds. The funds could be managed mainly by existing institutions.

The proposals for the general global fund and an international social fund are new. It is, of course, audacious to propose new taxes at a time when the focus is on reducing the tax burden. Furthermore, it will require courage to introduce a new fund, complete with a new source of funding and a new management structure in international fora. For this reason, the NAR advises using existing institutions and management structures as far as possible, but with new sources of funding. The funds, which are eleborated upon furtheron in this report, are listed below with name, aim, means of financing and the proposed management structure:

a. An environmental fund. It is proposed that the Global Environmental Facility (GEF) be used for this purpose. The fund could be used to implement the recommendations of the Environmental Conference in Rio de Janeiro, as laid down in Agenda 21. It could be funded from environmental taxes, in particular the proposed taxes on air tickets and kerosene. The management structure already exists and combines features of the UN and the Bretton Woods institutions (voting rights based on contributed capital, and the one country, one vote system).

b. Strengthening of the fund for UN peace and security operations. To pay for military operations commissioned by the Security Council. The UN already has a fund for this in New York. It could be funded from taxes on arms sales. In this case, the Security Council is the decisionmaking structure.

c. The Seabed Authority. The authority already exists and is responsible for management of the oceans. It could be funded from taxes on flights over the oceans and on consumption of marine resources; the management structure is laid down in the treaty on the oceans. This UN treaty also specifies that countries with a large continental shelf outside the 200 mile zone (such as Brazil, Sri Lanka and India) may exploit it if they transfer a part of the resulting revenue to the UN.

d. An international social fund. This is a new fund that could focus on poverty alleviation, education and health care, and on alleviation of the negative effects of globalisation. This would enable the aims of the Social Summit in Copenhagen to be achieved. It could be funded via the Tobin tax, with the UNDP as the coordinating organisation, and specialised agencies of the UN implementing projects in the areas of education and health.

e. A general global fund. This new fund could in the first instance help solve the financial problems of the United Nations, and then focus on international problems which are not addressed by the specific funds listed above. Funding: taxes on commons (in particular a tax on satellites and telecommunications), a tax on capital, an international turnover tax or a progressive global income tax. Management structure: somewhere between that of the UN and the Bretton Woods institutions. The NAR recommends that this idea be further elaborated by the new advisory council at the Ministry of Foreign Affairs, which should address all the practical matters relating to these recommendations.

The NAR recommends that these proposals first be discussed with a few like-minded countries and then placed on the agenda in Europe and at the UN. The Council proposes that research into this idea will be continued by the new advisory council of the Ministry of Foreign Affairs, the Advisory Council for International Affairs, which can also look into the practical matters.

1 FEWER AID FUNDS AVAILABLE FOR INTERNATIONAL PROBLEMS

The concept of 'global human security' was introduced in the Human Development Report 1994 (UNDP, 1994). It refers to safety and security in the areas of food, housing, access to drinking water, health care and education and protection against violence. According to the UNDP, in the next century, the behaviour of millions of people will pose a greater threat to human security than the aggression of a few nation states. This will take the form of insufficiently declining population growth, disparities in economic opportunities, excessive international migration, environmental degradation, the production of and trafficking in drugs and international terrorism. The UNDP also identifies nuclear proliferation, natural disasters and ethnic conflicts as international problems.

The UNDP (1994) proposed setting up a 'global human security fund' to enable a number of these international problems to be tackled. It was a reaction on the declining funds available for international problems, Official Development Aid funds (ODA ), as well as the funds of the United Nations or the Bretton Woods institutions. This may be a result of the end of the East-West confrontation, aid fatigue or perhaps increasing individualisation in the North, whereby the problems of others are of decreasing interest. Whatever the cause, the problems continue to increase, ironically enough also as a result of the end of the East-West confrontation, together with increasing wealth in the North and a number of countries in East Asia. Growth and the globalisation of the economy mean that a heavier burden is being imposed on the environment, particularly by the developed countries, the elites in the developing countries and increasingly by countries which - through rapid development - are closing the gap with the rich North.

In addition, the United Nations as a whole has been in dire financial straits since October 1995. UN employees may no longer go on business trips and several UN bodies no longer call in outside experts. The UN has had financial problems for many years, because certain member states pay their contributions too late or not at all. This, together with the increased number of peace operations, has led to the current acute crisis. One cause of the problem is that the United Nations does not impose the sanctions that are available on member states who fail to pay their contributions, particularly the worst offenders - the United States and the Russian Federation.

It is conceivable that the United States uses non-payment as a means of applying political pressure, to force the UN to reorganise and become more efficient. The Republican-dominated Congress plays a key role in this, since it must approve the allocation of all funds. At the beginning of February 1996, UN Secretary General Boutros Ghali warned of the imminent bankruptcy of the United Nations. The member states were once again called upon to meet their financial commitments and it was suggested that the United States pay a lower contribution, to reduce the UN's dependency on the superpower. Until now, however, the US has declined the offer, fearing a loss of influence over the organisation.

The simplest solution would be if those member states which are in arrears could be forced to pay their contributions. This would, however, still leave a structural problem, in that the UN would continue to be dependent on a small number of large contributors. Consequently, there has been a widespread call for changes to the minimum and maximum contributions. These are currently 0.01 and 25 per cent (the United States) respectively of total contributions. It has been proposed that the minimum be changed to 0.02 per cent and the maximum to 10 to 15 per cent.

The Dutch Advisory council for peace and security recommends in its advice 'Lost innocence, the Netherlands and UN-operations' (1996) to entitle the UN to raise its own funds for peace keeping operations by means of quasi taxation. The council is also in favour of giving priority to the repayment of expenditure of steady contributors. The council considers that to be a better idea than to hold the contribution.

Walker observes that: "the gap between the demands on the UN and its ability to meet them has become embarrassingly wide". Singer refers to the vicious circle in which the United Nations has become trapped. Many member states accuse the UN of not operating efficiently, while not paying the contributions that would enable it do so. Singer sees this as a reason for abandoning the system of 'one country, one vote' in favour of a system of voting somewhere between this and that employed by the Bretton Woods institutions (based on contribution to the capital of the institution concerned). This would of course depend on the financial resources of the Bretton Woods institutions also being available to the United Nations.

Ironically, the funding of the Bretton Woods institutions has also become problematic in recent years. During the annual meeting of the World Bank in October 1995 in Washington, it emerged that the Bank had insufficient cash to replenish the funds of the International Development Association (IDA, the soft loan window of the Bank). The International Monetary Fund (IMF) has difficulties in attracting more capital, which would enable it to take effective action in crises such as that in Mexico at the end of 1994 and the long-running financial crisis in Russia.

The United Nations have taken a number of measures to safeguard funds for implementation of the recommendations of UNCED and the Social Summit (to mention only two of the recent series of international conferences). Working groups have been set up and the UN Economic and Social Council (ECOSOC) submits regular reports on the funds required to implement the recommendations and the progress made (see, for example, UN 1995 and 1996).

The Council for Sustainable Development (CSD), concerned with the follow-up to Rio, and with Agenda 21 in particular, has met three times. At its third meeting in February 1996, a number of alternative means of funding were discussed. Initially the group focused on monitoring compliance with the financial pledges made at Rio and whether the policies agreed were actually being implemented. Gradually, however, the discussion shifted more towards instruments that could be used to carry out Agenda 21 and to generate additional tax revenues.

During a CSD meeting in 1995, the idea of setting up a national environmental fund was launched. The meeting also discussed traditional and innovative mechanisms to effect the transfer of environmentally friendly technology. A number of conclusions were reached, including the following:

it is important to increase revenues and, at the same time, to influence production and consumption patterns in such a way that sustainable development can be achieved;

it is desirable to set up national funds, for areas such as the environment, public sector pollution abatement (mostly composed of money raised through taxes and fines) and nature conservation;

it is important to impose heavier taxes on the felling of trees and the exploitation of minerals;

it is important to introduce the taxes already agreed upon and to set up a system of tradable emission permits linked to industrial pollution and pollution caused by fuel consumption and motorised vehicles.

A number of alternative sources of funds were discussed at the meeting in 1996 but no genuine choices were made.

Five pages of the final document of the Social Summit were devoted to ways in which money could be mobilised to help finance the Action Programme and the Final Declaration. The suggestions range from promoting savings at national level (so that more can be invested in social provisions) to restrictions on military expenditure. The Final Declaration does not specify any new forms of funding for social programmes, although it does call on governments, donors and international organisations to incorporate bilateral social development aims in their programmes and projects. In short, the need for alternative forms of funding is recognised, but it would seem that the United Nations cannot, at present, take the lead.

Otherwise, this report does not address the current functioning of the United Nations. Expansion of the funding to the UN should, however, be accompanied by a thorough reorganisation. The emphasis should lie on eliminating duplication of activities and on improving efficiency. Examples of this are the role of UNCTAD since the creation of the WTO, and of UNIDO now that most industrial development takes place in the private sector. A further point of attention is the enormous waste of resources resulting from the fact that, in many countries, all specialised agencies of the UN have their own offices with their own staff; the UN development programme could play a coordinating role in this respect.

A further issue that is not addressed is the idea of the SOW-VU (Stichting onderzoek wereld voedselvoorziening) and the IVM (Instituut voor Milieuvraagstukken) of the Free University in Amsterdam that the restriction of the free international movement of persons is a good reason for paying compensation to those affected, since loss of the right to choose where one lives and works is to lose the opportunity to earn an income elsewhere in the world.

2 TERMINOLOGY: COMMONS, PUBLIC GOODS AND GLOBAL PROBLEMS

The international community is called upon on a regular basis to tackle cross-border problems and threats to 'commons', and to safeguard human security. The international problems summarised in Table 1 relate to the prevention of armed conflict at national and international level, the fight against epidemics and infectious diseases, etc., which are often seen as matters of public concern.

In economic terms, public goods are goods and services in respect of which the government must be involved in the supply, either to ensure that no one is excluded (thereby rendering commercial exploitation unfeasible, e.g. a lighthouse), or for which no one can be held liable (e.g. the costs of extinguishing a fire). The problem is that the criteria defining public goods are not easy to apply. 'The public good of peace' may appeal to the imagination, but it is difficult to achieve in practice. Moreover, it will be pointed out immediately that, given the prevailing trend, public goods are also produced or distributed by the private sector or by a combination of the public and private sector (public-private partnerships).

Table 1: Problems which demand action on a global scale

On top of the international problems already mentioned, there are also the so called commons like the environment and biodiversity, which requires international action. 'Commons' are resources which are controlled jointly by a specific group or organisation and which cannot be divided into components with their own clearly defined rights. Some commons can in principle be divided up reasonably simply, between countries or groups of people, while others cannot. The decision to manage them jointly or to divide them up is a political one. There are many kinds of commons. Sometimes, individual members or small groups within the larger group holding joint ownership of the commons have few if any users' rights. Often, however, such rights do exist, as in the case of common grazing land in a number of cultures in the semi-arid areas of the Sahel where use by families or individuals is overseen by or on behalf of the community as a whole.

Open access resources are resources to which no public or private rights apply. Officially, therefore, they are freely accessible to anyone who wishes to make use of them and no one may be denied this right. A significant difference between commons and open access resources is that the use of the latter does not imply any form of obligation or other restriction, as a result of which no one can be held liable for the negative consequences of their use. Open access therefore leads in certain circumstances to overuse.

The management structures for commons are currently changing. Some may have been weakened during the colonial period, others may have lost much of their meaning as a result of modernisation, government intervention or rapid population growth. Local management and regulation mechanisms are no longer capable of controlling the resources adequately. This has had the unfortunate consequence that many once well-organised commons have in practice become open access resources, leaving individual users virtually free to do as they please. That phenomena is usually called the tragedy of the commons.

A related problem is that the state has often taken over the public right of joint management itself while, under local law, the right still belongs to the community which traditionally possessed the commons. As a result, the rights of access, use, management and disposal are interpreted differently under state and local law. The unclear legal status of the commons makes management very difficult. The situation is further complicated by the fact that it may not possible to exclude certain groups or individuals from consumption (e.g. in the case of irrigation systems), while all users should make a reasonable contribution to the costs.

In some cases, parts of the natural environment are considered common natural resources, without adequate management structures being developed. Examples of this are the oceans, heavenly bodies and outer space. They are essentially open access resources for which the need for a management structure has been recognised. These resources are often referred to as 'global commons' or 'the shared heritage of mankind'. They are, as yet, undivided and do not belong to any sovereign state, group or individual; no management or users' rights have been specified for them. They could perhaps more appropriately be referred to as 'global commons in the making'.

The term 'global commons' is also applied to major natural resources, like the tropical rainforests, to indicate that their conservation is in the interest of mankind as a whole. It is, however, incorrect to refer to these resources as global commons, since this ignores the private rights of ownership of countries, indigenous peoples, tribes, families or individuals. There may be joint ownership at the level of the community, or the resources may be owned by the state or, as in the case of parts of the tropical rainforest, be in private hands. The fact that it is in everyone's interest to preserve the tropical rainforests and that there is every reason to develop management structures at global level that will promote sustainable use is in itself no justification for simply declaring them global commons and thereby the property of mankind as a whole.

The important point is that these commons might require international care and intervention, while at the same time be considered sources of national or international funds. This applies in particular to the oceans and the resources they contain, and to international energy reserves. For commons like biodiversity, the electromagnetic spectrum (where you find radio and television waves) and the so called global electric commons (in which Internet is established), so far no suggestions have been done to use those as a source of funding.

Table 2: The scope for using commons as sources of funding

In its report on the environment, the NAR advises the Dutch government to adopt the basic principle that everyone should have equal access to the fruits of mankind's common heritage, but should then also make an equal contribution to its management. The question is, how is this equal share to be determined? The following criteria could perhaps be used, singly or in combination:

the surface area of the land concerned;

the number of inhabitants;

the resources available;

The following factors could also be taken into account:

the extent of environmental management required;

the level of development;

the rate at which the resources available are being exhausted.

Anyone using more of their share of the resources concerned should therefore compensate the others. This provision should, however, be applied carefully, since new reasons can always be produced for claiming a larger share of common resources. For example, countries with colder climates need more energy to heat buildings, while in tropical areas there is a greater need for air conditioning. And in areas where the population is less dense, more energy will be required per capita to maintain the infrastructure at an efficient level.

But the principle of equal access has not taken root everywhere. Henderson sees market forces as "seek(ing) to enclose such declining commons as ocean fish stocks (by arbitrarily allocating property rights to fisheries) and biodiversity (by continually encroaching on natural habitats and patenting life forms and species)". These resources are either declared common property or allocated by the market mechanism. Commons could therefore be a source of funds for the general global fund, which should in turn provide finance for their management.

3 INSTRUMENTS FOR FINANCING A GLOBAL FUND

3.1 Acceptance of an international tax

A number of examples of taxes imposed globally to help solve international problems will be examined below. This may appear futuristic at the moment, but history shows that the collection of taxes generally started locally and progressed gradually to national level. The same process could now be extended to the international level. The NAR recommends the introduction of a tax on capital, an international turnover tax or a progressive global income tax. The budget of the European Union is already partly financed through a levy on the VAT collected by the individual member states. This is based on the principle of supranational taxes for supranational purposes. People still accept a new form of tax more easily if its purpose is clear to them and the amount is limited. The general principles for imposing taxation are universality, functionality and feasibility. In a number of cases, surtaxes - such as those imposed in the United States and elsewhere - are easier to accept. These are taxes imposed by federal government to provide revenue for local authorities.

What criteria should be used to assess the instruments for raising funds for the general global fund? The following might be worthy of consideration:

It might be useful to consider the extent to which a particular instrument may cause economic distortions.

A link must be made between payment of a tax and what the taxpayer gets for it (the purpose of the tax); the effectiveness of the tax should be apparent. Taxes are more acceptable to taxpayers if they know that the money is to be used for a purpose that is considered desirable.

There must be an automatic element in the payment of the tax. Singer (1995) identifies this as an important requirement for alternative funding in the United States, but it applies to global taxation generally. Singer points out that where payment depends on the goodwill of the government concerned, revenue will be insufficient, unreliable and irregular.

The tax should be politically and technically feasible and allow a minimum of free riders.

After application of the subsidiarity principle, it must be clear that the problem can be tackled only at a global level.

The general principles of taxation, and factors such as feasibility and enforceability.

According to the NAR, the purchase of these taxes should be deposited into four specific funds. The funds could be managed mainly by existing institutions. First of all, an environmental fund could be set up, which could be used to implement the recommendations of the Environmental Conference in Rio de Janeiro, as laid down in Agenda 21. It could be funded from environmental taxes, in particular the proposed taxes on air tickets and kerosene. The management structure already exists and combines features of the UN and the Bretton Woods institutions (voting rights based on contributed capital, and the one country, one vote system). Secondly, the fund for UN peace and security operations could be strengthened. To pay for military operations commissioned by the Security Council. It could be funded from taxes on arms sales and the production of weapons. In this case, the Security Council is the decisionmaking structure.

A third fund could be found in the Seabed Authority. The authority already exists and is responsible for management of the oceans. It could be funded from taxes on flights over the oceans and on consumption of marine resources; the management structure is laid down in the treaty on the oceans. This UN treaty also specifies that countries with a large continental shelf outside the 200 mile zone (such as Brazil, Sri Lanka and India) may exploit it if they transfer a part of the resulting revenue to the UN.

Finally, the NAR recommends the set up of an international social fund. This is a new fund that could focus on poverty alleviation, education and health care, and on alleviation of the negative effects of globalisation. This would enable the aims of the Social Summit in Copenhagen to be achieved. It could be funded via the Tobin tax, with the UNDP as the coordinating organisation, and specialised agencies of the UN implementing projects in the areas of education and health.

Furthermore, the NAR encourages to initiate a general global fund. This new fund could in the first instance help solve the financial problems of the United Nations, and then focus on international problems which are not addressed by the specific funds listed above. Funding: taxes on commons (in particular a tax on satellites and telecommunications), a tax on capital, an international turnover tax or a progressive global income tax. Management structure: somewhere between that of the UN and the Bretton Woods institutions. The NAR views initiating a capital tax or a tax on international turnover and/or a global progressive income tax as other possibilities. The NAR recommends that this idea be further elaborated by the new advisory council at the Ministry of Foreign Affairs, which should address all the practical matters relating to these recommendations.

3.2 Taxing the commons

3.2.1 The resources of the sea

Although a tax on the use of marine resources may appear an attractive option, collection of such a tax would be difficult to organise. Secondly, a tax of this kind could not be expected to make a significant contribution to the general global fund. An alternative might be, however, to set up a number of smaller funds that could be used in the first instance to finance improvements in the fishing industry and off-shore mining, or to combat the destruction of the coral reefs and exhaustion of fish stocks.

The use of marine resources is frequently regulated by bilateral or multilateral conventions, such as that between Morocco and the European Union. Little support should be expected for taxes of this kind, because of the power of the European fishing industry. They would therefore prove unfeasible for political reasons.

D'Orville and Najman suggest that the newly-set up seabed authority could generate revenue (when it finally gets moving). It would seem logical to expect, however, that any such funds would be used in the first instance to achieve the aims of the organisation itself.

3.2.2 Tax on air and sea traffic

The fact that it is the task of the United Nations to create a peaceful world in which people should be free to travel where they wish could be used as an argument for a tax on air and sea traffic. Duindam's article provides a clear overview of the scope for a tax on air traffic. The idea of imposing a tax on aircraft fuel is considered in section 3.2.5.

Sea traffic seems more difficult to tax, because it is primarily a matter of cargo transport and taxes could easily be seen as a form of protectionism. This would not be a problem in the case of a genuinely international tax. Free riders would, however, be a problem with many of these measures.

3.2.3 Taxes on telecommunications

Telecommunications is currently the most rapidly developing sector in the world. Would it be possible to impose a charge of a cent per telephone call to raise money for the general global fund? How would it be registered and collected? What arguments could be given for such a tax, considering that companies have laid cables and launched satellites themselves? The justification could be that they use the land, the atmosphere and the electromagnetic spectrum.

The International Telecommunications Union (ITU) imposes a similar tax per conversation, but this does not apply to communication of other kinds, e.g. over the Internet. Another possibility would be to impose a tax on the stationing of privately operated satellites.

3.2.4 Taxes on the arms trade and the production of weapons

The Human Development Report 1994 also recommends regulation of the arms trade. However, the five leading arms exporters unfortunately happen to be among the most powerful states in the world - the former Soviet Union, the United States, France, China and the United Kingdom - which does not make imposition of such a tax an easy task (the Netherlands has since also moved to a relatively high position on the list). Considering that the international community is almost incapable of controlling the arms trade in, for example, former Yugoslavia, a tax of this kind would be very difficult to collect. A tax on the production of weapons would make it easier to control arms that do not leave the country.

In other contexts, however, it has been suggested that developing countries which spend a great deal on arms should receive less aid. Ironically, if a tax is imposed on the arms trade, it is then in the interests of the international community to promote such trade.

A tax on the production of land mines, however, is a very attractive proposition, if only because the international community - and the United Nations in particular - frequently has to bear the costs of medical care for the victims, not to mention clearing the mines (which is a very expensive operation). On the other hand, the probability of this proposal being implemented is very small. The last UN conference on land mines was a failure owing to the lack of political will to reach agreement. The leading exporters of land mines are currently India, Brazil and Italy.

3.2.5 Energy tax: carbon and kerosene tax

One of the recommendations of the Carlsson report was the introduction of a 'carbon tax'. The UNDP proposes a global tax of one dollar per barrel of oil (to be paid by the consumer) and a comparable amount on the consumption of coal. This will lead to a reduction in the use and, more importantly, the waste of these non-renewable resources.

The advantage of such a measure is clearly that consumption would fall. The disadvantage is that a large number of countries already impose energy taxes and use the revenue for other purposes. Furthermore, the political feasibility of this option is limited because the oil-producing countries have resisted it fiercely in the past. The argument of the OPEC states was that they were quite prepared to sell their oil for a dollar more to encourage a reduction in consumption, but that they did not see why they should have to foot the bill to solve a number of global problems.

The resistance to a tax on aircraft fuel (kerosene) illustrates the power of the lobbies when it comes to the introduction of taxes of this kind. The argument used in this case is that, if the Netherlands were to impose such a tax unilaterally, Schiphol would simply have to close down. Yet the impact on the environment is an extra argument for a tax on kerosene (or on the price of air tickets) as a source of funds for the general global fund. If this could be agreed at a regional level, the free-rider effect would be minimal.

In 1995, Jan Pronk, the Minister for Development Cooperation, also called for new financial instruments, regulated via the UN. He mentioned a tax on air transport as well as "levies on scarce or overutilized resources", as instruments to correct the workings of the market.

This report does not examine the possibility of a tax on wood, which is after all the fuel of the poor. Preservation of tropical and other forests demands international action that will cost money and for which funds will have to be provided. Many governments have already taken action to restrict the use of wood. International activities to improve the management of forests, and tropical rainforests in particular, could be funded from taxes on certain kinds of wood.

3.2.6 Environmental taxes

The UNDP (1994) suggested that tradable emission rights (there were references to "pollution permits") could set in motion a substantial flow of funds from the North to the South and thereby make a contribution to the development of the latter. Tradable emission rights have a minimal disruptive effect on the economy. A mechanism for a "global market in CO2 emission entitlements" is being worked out at the UN (1994) and elsewhere. It is difficult to calculate how much revenue this trade could generate for the general global fund.

Another possibility is provided by Sustainable Development Contracts. These could be concluded between industrialised and developing countries, with the latter implementing sustainable development programmes linking environmental protection to essential growth. As a quid pro quo, the industrialised countries would make their foreign savings available. The idea was originally proposed by Norwegian Minister for Foreign Affairs Stoltenberg, at a meeting of the OECD in 1989. At the same meeting proposals were made for economic reforms which would somewhat mitigate the effects of structural adjustment programmes. The funds for supporting foreign savings would be created through debt relief. Industrial countries would have to write off debts in exchange for a commitment from debtor countries to undertake programmes of sustainable development.

It has also been proposed that developing countries be compensated for the fact that the international community expects them to adopt development strategies that have a less destructive impact on the environment. The compensation should cover the extra costs that a more environmentally friendly strategy entails and the detrimental effects of the activities of the developed countries on the common biosphere. These latter two options would not generate income for the general global fund, but would provide extra revenue for developing countries which, after all, are confronted with the effects of most international problems are to be found.

Tims and Keyzer have proposed the introduction of a market system of clean air consumption rights, the proceeds of which should go to the poorest groups, because they impose a far smaller burden on the environment than the rich. The notion underlying this proposal - that the rich North pollutes the environment unjustly and at the expense of the poor in the South, without having to bear the cost, while the South receives no compensation - deserves closer consideration. This is even more important because it presents the opportunity to promote large flows of funds from the North to the South, which could be used to finance one of the major aims of development cooperation, poverty alleviation. However, there are serious objections to the authors' proposal to set up a market for shares in the environment, consisting of pollution rights. These objections can be summarised as follows:

1. Such a system would require, as would the introduction of tradable emission rights, a registration system of unprecedented scale and complexity, which would be exceptionally expensive. However, Tims and Keyzer don't agree to that. According to them transactions would take place on a global market with prices set on a daily basis. In their opinion, the registration of rights need not be complicated and transactions not expensive, as is the case with international transactions.

2. Rights of ownership to a 'parcel' of air would be impossible to safeguard against infringement, since there is no way of establishing the exact limits of the parcel. Consequently, enforcement of the right would be farcical. Supporters of such rights, however, claim that they would not be specific, but refer to a share in the total air available per member of the global population (this quantity might have to be fixed by negotiation alone). The problem then lies in establishing how much of the total pollution each individual polluter is responsible for.

3. The poor would benefit only if rights could be alienated for a relatively short time. The longer the period of alienation, the less control the original owner has over the right. Companies in the private sector would attempt to acquire the right for as long a period as possible, since every transaction costs money. Part of the costs would also be passed on to the owner of the right; consequently, owners would tend not to register their right and therefore not be in a position to enjoy the benefits. Tims and Keyzer (1994) propose that restrictions be placed on trade in these rights; for example, a rental period of five years, annual payments to the owner, etc.

4. A registration system of the scale and complexity required to provide sufficient safeguards for the poor would be extremely complex and therefore non-transparent. In all probability, an intermediate layer of officials would be created, who would cream off the lion's share of the profits.

3.3 Compensation for trade restrictions

A similar proposal is to compensate developing countries for the fact that industrial countries have restricted their imports from the Third World in response to social or economic pressure at home or the desire to continue production themselves even under unfavourable economic conditions. A system of this kind could be worked out under the auspices of the World Trade Organisation.

3.4 Taxes on capital flows: the Tobin tax

Traditionally, trade in goods has been taxed to generate revenue for local or national governments. VAT is an example of this. The current trend is, however, towards further liberalisation of trade and, since the Uruguay Round, the chances of reversing this process are small. Taxes on capital flows are less common. In the literature, a distinction is made between more speculative short-term flows, which result in a large number of currency transactions (and therefore fluctuations in exchange rates), and medium to long-term funding, which basically entails a single exchange transaction.

The total turnover of foreign currency on the currency markets was estimated in 1991 at US$ 900 billion per working day. Walker added that an amount equal to the American national income passed through the world's currency markets every week. A large part of this is payments and short-term flows, while capital flows and medium and long-term funding account only for a small percentage of the total. These funds will stay in the recipient country for a long period. The distinction must be made between official development finance and private funding. The latter includes bonds, commercial bank loans, direct foreign investments and investment in local shares. The most significant increase (to 174 billion dollars in 1994; World Bank, 1994) is in the direct foreign investments and portfolio investments categories.

The idea of the Tobin tax is to impose a very small percentage levy on the turnover on the currency markets. It has been estimated that a levy of between 0.05% and 0.025% of the value of the transaction would have almost no effect on the operation of the market, while generating sufficient revenue (between 55 and 220 billion dollars) to enable the aims agreed in Copenhagen to be achieved. These flows are not difficult to tax, since all transactions are registered and most are conducted via advanced computer networks. Tobin's original intention "to throw a little sand in the wheels of the system" was based on the belief that currency traders destabilise the international monetary system through the large-scale buying and selling of currencies. Supporters of the system would point out that this is how currency prices are determined on the market. There are two main arguments for the introduction of the Tobin tax. On the one hand, short-term flows can have disruptive effects, particularly on local currencies. On the other hand, it can be explained to those active on the market that a tax of this kind can help to bring about a more stable world in which a certain level of wealth and prosperity comes within reach - a situation which would also benefit the traders themselves.

Martin says of the mechanism: "A barely noticeable electronic deduction of 0.001 percent of each transaction would be nearly enough to pay the US peacekeeping bill". The UNDP has calculated that a tax of 0.05% (Tobin suggested 0.5%) would yield approximately US$ 150 billion a year (based on a market turnover of 1,000 billion dollars a day). If the tax were set at 0.0001% of each transaction, it would generate 10 dollars for every million dollars turnover.

The Tobin tax could be seen as a way of helping to preserve the common good of international security. Originally, however, the tax was intended as a way of combating speculation and fluctuations in the currency markets. A tax of this kind on currency transactions clearly has a number of advantages and disadvantages. The greatest advantages are the stabilising effect it would have on speculative money flows and the enormous income it could generate for the general global fund. On the other hand it is difficult to say exactly what percentage the Tobin tax should be set at (because the flow of speculative funds is cumulative) and, as yet, no one knows what the effect would be on interest rates. A number of countries - including Chile, Colombia and South Korea - already impose a similar tax, but opinions are divided as to the extent to which these can be seen as forerunners of the Tobin tax and whether their impact would be comparable at international level.

There are also a number of practical problems, such as where the line should be drawn between speculative and non-speculative transactions. The UNDP tries to avoid this problem by not making the distinction at all. If, however, everything is taxed, goods will also become slightly more expensive, because a small percentage of international transactions is linked to the flow of goods. After all, in a world of floating exchange rates, companies try to cover their risks by 'hedging'. International trade in derivatives also falls into the category of speculative flows. Part of this trade serves to eliminate currency risks for exporters. A tax on currency transactions would also make this form of insurance more expensive.

The disadvantages are that all countries would have to take part, or else the financial world would move lock, stock and barrel to the one Caribbean island that has not introduced the tax. Free riders would then completely undermine the implementation of the tax. Secondly, taxes always reduce the efficiency of a market. Felix, on the other hand, observes that the triangle of exchange rates, free trade and the free flow of capital is always disrupted by the third component and that the proposed tax would therefore actually remove distortions. Thirdly, a number of countries already impose taxes on the flow of capital and would be reluctant to release the revenues, which they use to achieve national objectives, to help solve international problems. Lastly, monetary integration - such as the introduction of EMU in Europe - means that large capital markets are created which are no longer affected by the Tobin tax and where, consequently, transactions can be conducted at lower cost.

Kaul prefers a "charge for capital market development", but this does not take full advantage of the character of the tax, since only part of the revenue would be used for that purpose. Nevertheless, the link between an environmental tax and the problem it aims to alleviate is clearer than in the case of the Tobin tax.

At the UNDP conference on this topic, four areas were identified for further study. Firstly, the scale of other types of global revenue-raising devices which simultaneously aim to promote development (in combination with a cost-benefit analysis); secondly, the legal and institutional aspects of the Tobin tax; thirdly, the feasibility of alternative transactions which enable the tax to be avoided, in conjunction with the consequences of a decision to conduct a transaction which is subject to tax; lastly, the acceptance of the Tobin tax and the corresponding political and economic factors, at both national and international levels.

Although the Tobin tax, a tax on speculative capital flow, is relatively controversial and has attracted widespread criticism in the Netherlands and elsewhere, its positive features - promoted so forcefully by the UNDP - have also received considerable attention. This illustrates that a choice, particularly in the case of the Tobin tax, is very difficult.

3.5 Fund-raising

A number of UN agencies have proved capable of raising funds for themselves. UNICEF, for example, funds a large percentage of its budget from the sale of greetings cards. The UNHCR, the UN refugee organisation, also conducts fund-raising activities; in fact, all UN specialised agencies (including the ILO and FAO) make their own contributions to their budgets. In addition, they try to implement programmes jointly with bilateral or multilateral donors, or get the donors themselves to bear the costs. It is often claimed, however, that multi-bi funded projects largely lead to increased costs.

Fund-raising is a necessity, and should continue, but it is not a realistic alternative when it comes to financing the regular work of the United Nations, let alone finding an effective solution to the global problems mentioned above. The amounts raised are too small and there is a risk that the general public will not be prepared to give money for certain conflicts (such as the civil war in Liberia).

3.6 Privatisation of certain UN activities

Certain UN activities could be eligible for privatisation. In any case, the specialised agencies could be more active in the area of cost recovery. The Universal Postal Union and the International Civil Aviation Organisation, for example, provide a wide range of useful services, but often at prices far below cost. A commercial approach could be a first step towards privatisation. The advantage of such an approach is that there would be more money left over to tackle the problems we are concerned with here.

D'Orville and Najman put forward the ITU and the World Intellectual Property Rights Organisation (WIPO) as examples of cost recovery. A number of non-governmental organisations in the academic and industrial sectors already contribute to certain ITU activities in which they have shown an interest in participating. The WIPO's income is divided equally between contributions from the member states and from non-governmental holders of intellectual property rights who make use of the WIPO's services.

Although user charges could be introduced in all of these cases, the possibilities remain limited and, in all probability, the organisations would use the revenue in the first instance for their own purposes. Other options should therefore also be explored.

3.7 Other sources of funds for the general global fund

3.7.1 Capturing the peace dividend

The idea of using the funds that have become available as a result of reduced expenditure on armaments since the end of the Cold War is very enticing. One of the chapters in the 1994 UNDP report was entitled 'Capturing the peace dividend'. It contained a plea by Oscar Aries, former President of Costa Rica and the winner of the Nobel Peace Prize in 1987, for the setting up of a global demilitarisation fund. Ul Haq has calculated that global military expenditure fell sufficiently between 1987 and 1995 to produce a peace dividend of 1,000 billion dollars.

However, even in the Netherlands, savings on defence budgets have been limited and a controversial political issue. There is little chance that the money saved will be deposited in an international fund or that this can become a reliable source of funding in the long term. Wolf stated in the Financial Times: "As for the longed-for peace dividend, it has already been absorbed by transfers". He observed that income transfers and subsidies in the OECD countries rose from 8 to 21 per cent of GNP between 1962 and 1992. Others take a more positive approach, pointing out that the money is used to reduce the national debt, a priority particularly for countries hoping to join the European Monetary Union.

3.7.2 Depositing money saved on subsidies in the general global fund

As a result of the liberalisation of trade since the completion of the Uruguay Round in 1994, a number of countries now have to pay fewer subsidies. The question is how these are to be calculated and whether these countries would be prepared to deposit part of the money saved in the general global fund. Savings on national budgets in the West are always discussed in national parliaments. The funds released are consequently reallocated within the national political circuit, in which the UN plays no role and the focus is on domestic aims. The EU was, in effect, faced with the same problem, but has solved it by acquiring a statutory share in VAT revenue. A similar system should be introduced by the UN, but this would require the equivalent of the European Parliament with certain budgetary entitlements.

3.7.3 Global income tax

The UNDP suggested the introduction of a global income tax and the setting up of a 'global safety net' that could be financed from the revenue raised by this tax. The idea is that rich countries pay a certain percentage of their national income to the poorer countries. It would be preferable, however, if rich individuals were to pay for poorer people. The question in this case is what form a global safety net should take.

In the past, the NAR has stated its preference for taxes on capital and material goods, instead of on labour. An income tax of this kind must not push up labour costs and the personal allowance must be set at a level that does not lead to greater unemployment. At the same time, a study could be instigated into the scope for an international wealth tax.

The advantage of a tax of this kind is that it would generate substantial funds for the general global fund. One problem, however, is that rich countries will claim that ODA can already be interpreted in this way and that there is therefore no reason to provide funds over and above those already pledged.

3.8 Tapping the resources of the Bretton Woods institutions

Singer is one of the authors who proposes tapping the resources of the Bretton Woods institutions, and of the IMF in particular. They could, for example, create Special Drawing Rights (SDRs) or the IMF could sell some of its gold reserves. SDRs can be considered as liquid assets. At the moment they amount to 30 billion dollars, 2% of total global (non-gold) reserves in 1995; in other words, a very small amount.

D'Orville and Najman believe that, to reduce dependency on donor countries, the United Nations should be given the right to issue SDRs. The IMF could issue them already were it not for the fact that, at the meeting of the Bretton Woods institutions in Madrid in September 1994, the member states refused to give their permission, concluding that there is no need for additional international liquid assets. D'Orville and Najman proposed that, when the Security Council has decided to mount a peace operation, the United Nations should automatically be able to use SDRs. Peace operations currently cost approximately US$ 5 billion a year. The Carlsson report also proposes improving the position of the IMF by reinstating its right to issue Special Drawing Rights.

The world needs more and more liquid assets and why should the dollar and, to a lesser extent, the yen always have to fulfil this function? The idea of issuing SDRs has been proposed by Michel Camdessus, the top man at the IMF, while England has suggested the sale of gold reserves, but at the Madrid meeting in 1994 and again in Washington in October 1995, neither proposal received a majority. Approval was given for the sale of a very small amount of gold, but only to increase the funds of the IMF itself.

The arguments against the issue of SDRs are that the IMF is not concerned with the alleviation of poverty and, more fundamentally, that the current system of flexible exchange rates reduces the necessity for international reserves. Furthermore, developed countries have easy access to the European currency markets, where they can borrow money. Lastly, a number of commentators are afraid that increased liquidity would lead to a rise in inflation.

4 PRACTICAL MATTERS

4.1 Who should impose the taxes?

In most cases, the taxes examined here would have to be imposed by national governments. That means two things. Firstly there would have to be an allocation formula to establish how much of the revenue should stay in the country and how much should be used for international purposes. Secondly there would need to be a supervisory body to ensure that the tax is actually collected and the revenue deposited in the fund created for that purpose.

4.2 What should the funds be used for?

Before any of the instruments considered here could be introduced, the various countries concerned would have to agree on its purpose. In addition, once the money had been deposited in the general global fund, there would have to be a body to regulate the allocation of funds to the various organisations and projects. This cannot occur, however, until agreement has been reached on the nature of the fund to be created.

4.3 How is it to be organised?

From a technical point of view, it is comparatively simple to impose a levy like the Tobin tax, because the transactions concerned are registered by computer. Banks and currency traders are all registered and would have to open a separate account in which the tax payments could be deposited. Collection of the other taxes would be slightly more complicated, because there might be certain well-organised interest groups (for example, the banks) which would not wish to participate.

4.4 How should the money be distributed?

The revenue from these taxes could be distributed at various levels. Herewith, subsidiarity plays a role. In the first instance, as mentioned above, it is a question of how much should be used by national governments and how much for international purposes. It seems reasonable to allow individual countries at least one percent of the revenue to cover administrative costs, for example. It is then a matter of deciding how much should go to the United Nations, the Bretton Woods institutions and other organisations. Furthermore, transparancy and checks on both income and expenditure are of great importance.

4.5 How are these ideas to be introduced?

The proposed tax must be introduced simultaneously worldwide, to prevent certain countries from acting as tax-free havens. This will require agreement at national, regional (EU) and international level. Referring to acceptance of the Tobin tax, Walker reversed the direction of the process: "An agreement by the dominant G-7 economies, backed up by the OECD, requiring their own banks and trading houses to comply should suffice to police such a relatively painless system of exploiting this global resource".

4.6 How should the funds be managed?

The discussion has so far devoted little attention to the need for bodies to supervise international financial developments. Henderson formulates the problem as follows: "Nowhere is the widening lag in social innovation more visible than in the growing gap between the explosion of computerised global financial trading (over 90% of which is speculation) and the so-far feeble efforts of the finance ministers, bankers and international bodies, such as the Bank for International Settlements (BIS) and the IMF, to create the needed regulatory regime". The UNDP (1994: 84) proposes the creation not only of a European Security Council and an International Investment Trust, but also of a World Central Bank. In addition to regulatory tasks, this bank would have a stabilising function. The UNDP also proposed that the bank be a lender of last resort for financial institutions, with powers to create new international liquid assets (similar to SDRs).

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