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Debate: Global tax

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Should the United States support a global tax?


Background and Context of Debate:

Discussions on introducing a global tax to support international aid efforts have been around since at least the early 1990s. Different solutions have since been proposed, including taxing international currency transactions, air transport and the arms trade. The most controversial of the three has been the currency transaction tax, also known as the Tobin Tax (named after Nobel Laureate James Tobin who proposed the tax as a way to stabilize currency markets and prevent future currency and financial crises). The Tobin tax, if successfully in place, would generate enough income to support many of the international relief efforts around the world. Given that an international institution is needed in order to oversee the Tax’s enforcement as well as manage the revenue, the United Nations has been named a likely potential manager. The UN has been very receptive to this proposal and sees in it the potential to fund a UN army as well as many of its humanitarian and relief efforts in the developing world. The tax is supported by two groups: less radical liberal economists like Tobin, who believe that the tax would create a sense of stability in currency and financial markets, and development and human rights activists who look at the tax mainly in terms of the revenue it promises to raise and how that revenue could be used in different aid efforts. The opposition to this tax comes from national governments, and international institutions such as the World Bank and the International Monetary Fund, who see any additional regulation to the liberal global market as a possible threat to further economic development. Several countries have already introduced a tax on their currency transactions – e.g. Chile and Malaysia – while others have expressed definite interest in doing so – e.g. Belgium, France, Canada, Brazil and Venezuela. The US government has been opposed to the idea of such a tax.[1]

Stability: Would a global tax be an effective way to help solve currency instability internationally?


The Tobin Tax is an efficient way to stabilize currency and financial markets: '


World poverty and currency crises are unlikely to be solved through a global tax: Although lack of funds is often given as the main problem in addressing world poverty and humanitarian crises, much writing on development now agrees that the North-South gap will not be narrowed through a mere transfer of funds. These funds often make the receiving countries dependent on outside funding, their economies centred on aid as opposed to industrialization and technological development (see Bosnia). Up to 50%, if not more, of international aid is often used for the wrong purposes, remains unused or ends up in the pockets of corrupt politicians and other actors. Currency crises are also a result of a series of factors, including lack of economic reform, levels of debt, inflation and more - not just currency speculation.[2]

Revenue: Is it good that a tax would generate revenue, and would this revenue be spent well?


A global tax could raise billions of dollars/year that could easily be used to fund UN aid efforts: Given the current levels of poverty in the world and the desperate situations that we have seen emerging over and over again in the developing world (e.g. the Asian tsunami, or Kashmiri earthquake), the need for increased funds for aid seems clear. In addition, speculation in the international currency markets has had a damaging effect, destabilising the economies of many countries over the years (e.g. Britain 1947-1992, Asia in the economic crisis of the late 1990s, Argentina since 2000). By damping down volatility in the currency markets while raising money for the UN, the Tax would be an ideal solution to problems like this.[3]

The Tobin Tax would be a way to ensure that there is a stable, yearly contribution to a global relief fund, most likely administered by the United Nations: It would overcome the current problem of countries making high-profile aid promises (e.g about relief aid after the Asian Tsunami, or of development aid to Afghanistan), and then failing to deliver on these pledges when the issue fades from the headlines. It would also help take politics out of the current fundraising process, where funds and donations have for the most part come with political strings attached either to the UN, recipients or other donors.[4]

A global tax would move us in the right direction in terms of management of new global concerns, including environmental, economical and political: As an international mechanism for solving global financial problems, a Tobin tax would provide a precedent that could be followed to address other issues. Even if only a few important currencies raised most of the money, that is because countries and companies all over the world wish to trade in them, so a rough equity is ensured.[5]


The revenue-collection process is likely to be politicized: Given that the Tax, if implemented, will most likely have to be enforced by each country individually, with funds later to be transferred to the UN, there is little chance that the process would be apolitical. While the politics would change, the main contributing countries would continue to be the countries with the strongest currencies (Japan, EU, USA, Canada) and their political interests will stay put. Given that the UN has been ridden with corruption charges in the past few years, countries may also express reservations to donating the money to the UN.[6]

Fairness and equality: Would a global tax be a fair and equitable measure internationally?


The Tobin Tax would ease the international relief, aid and intervention burden that usually falls on the United States’ shoulders: By empowering the United Nations and possibly funding a UN army, the burden would be shifted from the USA to the UN and will be managed in a more neutral and fair way. This would also help address the burning question of UN reform and UN legitimacy in the post-Cold War era.[7]


While the USA would like to see other international actors be held responsible for not acting during humanitarian crises, the US has relied on its role as the world’s premier power in order to justify much of its foreign policy in the post-Cold War era: Calls for US isolationism receive little support in today’s political arena. Given the current bad relations between the UN and the USA, it is highly unlikely that the US would be willing to concede its role as the world’s policeman to the UN, especially at a time when the UN’s legitimacy and reform process is highly questionable. It is governments who have the power to tax, and we do not want the UN to become a world government, undemocratic and unaccountable. This tax should not be regarded as a way for the UN to find a new role for itself. The problems that UN faces go far beyond budgetary concerns.[8]

A Tobin Tax would put an unfair burden on important currencies: A global tax could potentially be a solution to larger global concerns, such as the environment or humanitarian crises, but the Tobin tax would place the burden mainly on important currencies as opposed to all world countries. Countries which refuse to make their currencies fully convertible would be able to opt out of the tax. A fair global tax would need to be more neutral in purpose, have fewer strings attached, and include everyone’s participation based on each country’s GDP and potential for development.[9]

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