Big hopes for global fairness in a Robin Hood tax
There is no denying it: the world is facing some extreme challenges. Hunger affects one in seven people. Climate change is contributing to rising temperatures and destabilising critical rain patterns. And global economic instability is causing mayhem.
Is it possible economists have the answer to how we address these three key challenges of our time?
As the Australian Government's tax forum approaches, economists do have a few suggestions to help us address poverty, climate change and economic instability. One proposal is the financial transaction tax, firmly on the agenda at the G20 in November.
Hunger affects over a billion people. While the world has promised to halve global poverty by 2015 through the millennium development goals, much of the promised money has not been forthcoming. The international community cannot even seem to come up with the extra billion dollars for the drought emergency in the Horn of Africa - a crisis that affects more than 13million people.
Then there's climate change. Through our work around the world, Oxfam is seeing first-hand the devastating impacts that climate change is having on poor communities.
We need to support developing countries to adapt to the impacts of climate change and follow low-carbon development pathways - so they can leapfrog our high polluting ways. To facilitate this, developed countries such as Australia have committed collectively to provide $US100billion a year from 2020. But while this money has been promised, so far no country has found a reliable long-term source of funding to meet this commitment. If the climate fund remains an empty shell, a global deal on climate change will simply crack.
And finally, we have the seemingly unending crisis facing the global financial system. Markets rocket up and down like a roller coaster almost daily, and threaten to completely come off the rails. When the world markets take a sudden nosedive, such as during the global financial crisis, global unemployment shoots up and more people are pushed into hunger and desperation. Somehow we need to reduce this volatility and stabilise the markets.
Could a tax really help solve these problems?
The Robin Hood tax (also known as a financial transaction tax, or FTT) is a 0.05 per cent tax on institutional trades of currencies, stocks, bonds, derivatives and interest rate securities. It is predicted that this could raise hundreds of billions of dollars globally a year. Proponents suggest this money could be split, with half dealing with climate change and poverty in developing countries and the other half helping to provide decent health and education programs in the countries that levy the tax.
On top of this, economists believe such a tax could contribute to stability on global markets. A thousand of the world's leading economists recently wrote to the G20 (the group of 20 countries with the biggest economies) urging them to take up the tax when they meet in November. The economists believe that a tax would help discourage high-velocity transactions (the buying and selling on markets that last only a few seconds - treating the markets like a casino). These short-term transactions cause upsurges and down-surges in the market to be exaggerated, increasing volatility and nervousness. A tax that would discourage these transactions could help create a more stable global economy and bring greater prosperity.
Just to be clear: the tax would not affect consumers at the ATM. It would only affect investment banks that deal in bonds, shares and currency transactions that occur on international markets.
Many European countries, including France, Germany, Spain, Finland, Austria, Hungary, Greece and Portugal, are now willing to give the Robin Hood tax a go. Meanwhile, it is being widely reported that leaked documents from the Gates Foundation show that it backs a financial transaction tax.
European Union finance ministers are expected to discuss the proposal in a meeting held on the same day as the Australian Government's tax forum which begins tomorrow. But to be really effective, we need all the richest countries involved.
A financial transaction tax is on the agenda at November's G20 meeting, and Australia can play a critical role in ensuring the proposal is fully discussed and progressed.
Oxfam will be raising the benefits of a Robin Hood tax at the tax forum in Canberra, and it hopes, when the facts are laid bare, this will get Australia to throw its full support behind this proposal.
The world can face its multitude of challenges with the help of (who would have thought it) a tax.
James Ensor is director of policy for Oxfam Australia, and will be a delegate at the two-day tax forum.