The campaign for increased aid revenue through innovative taxation has built up unparalleled momentum over the last year. Key milestones have been:
- July 2004: Belgium passes currency transaction tax (CTT) legislation.
- September 2004: Presidents of France, Brazil, Spain and Chile announced that “ ... a tax on foreign exchange transactions is technically feasible”.
- January 2005: President Chirac and Chancellor Schroeder at the World Economic Forum specify taxing currencies as a possible means to fund development.
- March 2005: the IMF and the World Bank produced a paper on new taxes to finance aid
- April 2005: innovative taxation to finance poor country aid was openly discussed for first time in meetings of both European and G7 finance ministers.
To have taxation to pay for international development on the agenda for such high-level meetings, and for the IMF and World Bank to write a research paper comparing and contrasting innovative sources of development finance is quite unprecedented – unthinkable even a year ago. The decision-making climate has markedly changed, with possibilities opening up that hitherto didn’t exist.
This progress has been reflected in the last few weeks with the agreement by a number of European countries for an air ticket tax to pay for aid. This is a landmark moment – a decision for international cooperation to finance development through taxation. It needs to be strongly emphasised, however, that the current proposal is for a 1-3 euro levy on each ticket, which is likely to raise considerably less than 1 billion euro each year, so will only fractionally increase overall aid spending. This means that complementary income streams such as a currency transaction tax are as urgently needed as ever.
The air ticket tax is primarily important as a precedent, paving the way for the more general use of taxation by countries working cooperatively to fight poverty.
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