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Extra
A tax on the whole world?
The French president has proposed a global tax to fight AIDS. Critics dismiss the idea, but calls for international levies are being made more and more often.
By Rick VanderKnyff
Bad weather kept French President Jacques Chirac from attending the first day of the recent World Economic Forum in Davos, Switzerland, but it didn't prevent him from floating the idea, via video address, of a global tax to help fund the fight against AIDS.
Predictably, AIDS groups and some nonprofit organizations -- both potential beneficiaries -- embraced the Chirac tax. Swiss bankers blasted it (more on why later). Pragmatists, including former President Bill Clinton and South African President Thabo Mbeki, politely pointed out its impracticality.
But Chirac isn't some lone gunman advocating a global tax. There is a growing chorus of supporters in favor of assessing an international levy that would be used for humanitarian purposes. Critics may laugh it off now, but the idea isn't going away soon.
An idea whose time may yet come
Even Chirac's current proposal, as doomed as it appears, has some prominent backers. British Prime Minister Tony Blair expressed initial support for the plan, and The Guardian newspaper in London called it "an innovative and thought-provoking solution" that deserved international support.
But there are reasons Chirac's current plan won't work. One big problem: The cumbersome logistics of implementing such a tax means that revenues would be as much as a decade away. "The resources are required today," Mbeki said, speaking at the same panel as Chirac.
In the United States, the idea gets a double blast from the anti-U.N. faction and tax opponents, who jointly label any such move an affront to American sovereignty. The U.S. Congress wouldn't touch such a plan -- the lawmakers already shot down a global tax in the mid-'90s meant to fund the U.N. -- so the world's largest economy won't be on board.
But the idea never quite goes away, and it appears to be back on an upswing that was capped by the French president's latest comments.
Eliminating AIDS and AK-47s
Global tax proposals generally are designed for one, or both, of two purposes. Some are meant to curtail a "bad" activity, such as the burning of excessive amounts of fossil fuel or the proliferation of small weapons. Some are meant to raise funds for a cause that's too big for any one nation to handle, from AIDS to global warming to poverty eradication.
The carbon tax, which would place a levy on the burning of carbon-based fuels such as coal and gasoline, is one popular idea that in theory does both: It would curb fossil-fuel use -- slowing global warming -- and raise money for global development programs. An EU-wide carbon tax is under consideration, and the U.N. has floated a proposal that would put the levy at $21 per ton of carbon released into the atmosphere, which works out to about 4.8 cents per gallon of gas.
The global tax idea first gained prominence in 1972, when it was proposed by the U.N. Conference on the Human Environment. That's also the year a Yale economist named James Tobin, who would later win a Nobel Prize, proposed a tax on currency transactions.
Tobin, concerned about the potential for financial crises caused by currency trading, wanted to reduce volatility in the currency markets by setting the tax at a level (he proposed up to 0.25%) that would deter short-term speculating (bad) without hindering long-term trading (good). The so-called Tobin tax still has global advocates.
Other leading candidates for a global tax, as outlined by a group called the Global Policy Forum, include an aviation fuel tax, an e-mail tax (based on the amount of data sent) and a weapons tax. There have even been calls for a global lottery.
Why a global tax?
Chirac has touted the idea of a global tax several times in recent years, most recently last fall at the United Nations in New York.
"Global taxes are inherently undemocratic," U.S. Agriculture Secretary Ann Veneman said at the time. "Implementation is impossible."
Undeterred by such opposition, Chirac told delegates in Davos this week that he wanted to move forward with the creation "in an experimental way, of a levy to finance the fight against AIDS."
Chirac said such a tax could raise $10 billion a year. It would be used not only to make medicines more readily available to AIDS sufferers in developing countries, but also to help finance research into a vaccine and develop prevention campaigns, according to Reuters.
In true trial-balloon fashion, Chirac proposed several mechanisms for implementing the tax:- through a Tobin-style tax on all financial transactions;
- by taxing fuel for air and sea transport; or
- by levying $1 on every airline ticket sold in the world.
He also floated the idea of a tax on money flowing in and out of countries with banking secrecy laws (hence the angry Swiss bankers).
How would the money be collected?
Chirac didn't offer specifics, but global-tax advocates envision the creation of a global-tax authority, a kind of super IRS. It's that kind of talk that gives U.S. critics nightmares. A likely interim step would be to entrust participating national governments to collect the taxes and pass them along to an international body, probably one affiliated with the United Nations.
No income-style taxes have been seriously proposed -- all of the taxes add a levy to commodities or services, or to industrial or financial activities.
How much money are we talking?
A 2002 paper from the Global Policy Forum collected information on the "revenue potential" from a number of proposals. A sampling:- The U.N. estimates that a tax amounting to $21 per ton of carbon (about 4.8 cents per gallon of gas) would raise $125 billion annually.
- A currency tax of 0.2%, even assuming a 50% reduction in transactions, would result in $300 billion annually.
- An aviation-fuel tax of 25%: revenues of $12.5 billion per year.
Much of the recent renaissance in the global-tax discussion arises from the Millennium Development Goals adopted by member states of the U.N. in 2000, which include the aim of cutting global poverty in half by 2015. Meeting the goals will cost an estimated $50 billion a year. Leading candidates, according to backers: The Tobin tax and a carbon tax -- but a global lottery is in the mix, too.
What are the chances?
The Bush administration has not replied formally to Chirac's latest proposal, but the bankers aren't holding back. "A far better idea would be if the oh-so-pious French were to impose a tax on nasty tin-pot dictators who purchase real estate on the Cote d'Azur, topped up with a tax on French bank loans and arms sales to countries with brutally repressive regimes," one Swiss industry spokesman told the swissinfo news agency.
No one gives the proposal a serious chance of getting traction in the United States, especially with Congress and the presidency in GOP hands. The last time the issue was seriously discussed by the U.N. was in the mid-'90s. Not coincidentally, this is when the United States has holding back its voluntary annual dues to the organization.
Then-Sen. Jesse Helms was the most visible critic. He pushed through a bill in 1996, signed by Clinton in 1997, that said the United States could not pay its dues unless the president affirmed in writing that the U.N. "is not engaged in any effort to develop, advocate, promote or publicize any proposal concerning taxation or fees on United States persons in order to raise revenue for the United Nations or any such agency."
So there.
But advocates keep pushing the idea -- confident that, someday, their time will come.
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