December 9, 2009 2:00 am

Micro-tax call to support poor nations

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France is pressing for a modified Tobin tax - a micro-payment on financial transactions - to be included in any agreement at the Copenhagen conference as a means to help the developing world tackle climate change.

Bernard Kouchner, French foreign minister, made a brief round-trip visit to New York on Monday to enlist Ban Ki-moon, UN secretary-general, in support of the French initiative at Copenhagen and of President Nicolas Sarkozy's separate proposal for a new World Environment Organisation.

Mr Kouchner said a "contribution" of 0.005 per cent on all financial transactions could amount to billions of dollars a year for the developing world. This would fill the gap caused by lack of donor funds to meet agreed goals to eradicate poverty in the developing world.

The concept of a micro-tax on financial transactions was first put forward in the 1970s by James Tobin, a US economist, as a way for countries to protect themselves against foreign exchange volatility caused by short-term speculation.

For decades, the idea of a Tobin tax was promoted almost exclusively by anti-globalisation and development activists as a way to tax growing financial markets for the benefit of the poor. But the Tobin concept has seen a revival since the onset of the financial crisis.

Mr Kouchner suggested for the first time on Monday that the idea of such micro-contributions to support development should be written into whatever document emerged from the climate change summit.

"I hope it will really be mentioned in the text of Copenhagen," he told a press conference.

He also urged Mr Ban to put the proposal to the UN General Assembly as a means of broadening innovative sources of finance for development. Mr Kouchner said his concept was quite distinct from a Tobin tax, although French officials acknowledged the main differences were the much lower proposed scale of contributions and the uses to which the funds raised would be put.

Banking and business lobbies, as well as governments with thriving financial sectors, have resisted such taxes in the past, arguing they would drive business off-shore and act as a constraint on some markets unless universally applied.

However, a number of governments have more recently examined the Tobin concept as a means of bailing out banks in financial crises. Gordon Brown, UK prime minister, floated the idea at a Group of 20 meeting last month but backpedalled after other countries, including the US, said they would not support taxing financial transactions. A team of international economists revived the idea of such micro-taxes more than a year ago at a conference chaired by Philippe Douste-Blazy, the former French foreign minister appointed by the UN to find new ways in which private business can help support development. It was again raised by the French at a conference in Paris this year on innovative financing.

Mr Kouchner also reiterated Mr Sarkozy's call at the UN in September for the establishment of a World Environment Agency under UN auspices. The body would monitor how countries fulfilled their promises to limit carbon emissions, he said.

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