Bill Gates, the philanthropist and former head of Microsoft, has said that finance for development should be raised from a range of sources, not just the global “Robin Hood” tax called for by anti-poverty campaigners.
France, Germany, aid agencies and the Catholic and Anglican churches have argued that a financial transaction tax (FTT), which would be used to fund development projects, could be the answer to poor countries’ problems.
But in a report to the Group of 20 leaders on priorities to address global poverty, Mr Gates stressed the need to raise development finance from a range of sources. These include aid budgets, taxes raised in poor countries and private finance as well as the possibility of new taxes, such as tariffs on shipping and airline fuel.
Mr Gates’ intervention offers only qualified support for FTT, which continues to be the subject of fierce debate. Critics of the tax argue that it would simply push trade from one financial centre to another. In the G20, Germany and France back the creation of such a tax but the US, Canada, Australia and the UK, among others, reject the need for FTT. On Thursday, France’s President Nicolas Sarkozy voiced optimism that agreement on the tax could be reached. "I think we have a common analysis on how to get the world of finance to contribute to resolving today's crisis," he said.
But Mr Gates said in an interview with the Financial Times that advocacy of FTT was just one “tactic” in an overall strategy of increasing finance for development. “It’s fair to say that countries here [at the G20] aren’t going to co-ordinate tax policies. That’s not realistic.”
Mr Gates acknowledged his expertise was not in the design of tax systems. He said: “A financial transaction tax could be one of the tactics” used by rich countries if they wished to raise new revenues to maintain or expand overseas’ aid budgets.
But pressed on which new taxes were most suited to financing development, he stressed that an FTT ranked behind tobacco duties, which are linked to health, and shipping and aviation fuel taxes which are associated with combating climate change. “If you took the money [from fuel taxes] and used it to help mitigate the damage [burning fuel] does to feeding their poor families in Africa …then you have a connection as you are using revenues from that activity to mitigate some of the damage caused.”
The Gates report stresses innovation in agriculture, more effective tax collection, private sector finance for infrastructure and a focus on continuing aid payments by rich countries as the necessary stepping stones for development.
His report comes as Oxfam and other aid organisation fret that rich countries are using the economic crisis to curb their overseas aid budgets. Max Lawson, a policy specialist at Oxfam, said planned budget cuts, particularly in Italy, Spain, the US and the Netherlands, “represent the gravest threat to aid levels in 15 years”.
Even if the Gates report is cooler on an FTT than many campaigners against poverty would like, many aid agencies welcomed the G20’s decision to concentrate on aid and development for the first time. Brendan Cox of Save the Children said the report marked the first time the G20 would address development finance comprehensively. “The report sets out a series of realistic and affordable actions that over time could save millions of children’s lives. All G20 leaders must commit to putting in place its recommendations and to review their progress when they meet next in Mexico,” he added.
Although the Gates report highlights aid, it also notes that “by far the largest supply of finance for development will come from developing countries themselves” and recommended technical assistance to poor countries to help them develop their revenue collection systems.
In his FT interview, Mr Gates said rich countries should meet their aid obligations and fast-growing emerging economies, such as China, should use their experience in escaping poverty and their technical skills to help poorer countries emulate their success. Once countries have sorted out their health and agricultural sectors, Mr Gates said, there should be scope for private investors to link up with international financial institutions, such as the World Bank, for infrastructure projects. “The returns on decent roads and electricity are very high,” Mr Gates said.
With his Microsoft background, Mr Gates was keen to promote innovation as a route out of poverty, particularly in agriculture. More than half the children in the world are born outside the G20 in poor countries, he said, and those poorest countries are where there is the greatest scope for improvement in agricultural productivity.
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