As governments attempt to rein in public deficits, and with many EU member states scaling back their overseas development aid (ODA) contributions, an FTT is capable of generating the kind of revenue which is needed to put progress towards the Millennium Development Goals (MDGs) back on track. As Natalia Alonso points out, “The introduction of an FTT in the EU could make the difference between success and failure in the quest to fund the MDGs. Rich nations owe it to their poorer counterparts to support their efforts to eradicate poverty and improve public health.”
The FTT is a tiny levy designed to tax the value of single transactions which would be broadly applied to a range of financial instruments, including equities, bonds, currencies and derivatives. The European Parliament estimates that the FTT is capable of raising up to €200bn annually at the EU level alone. The health MDGs – on child mortality, maternal health and tackling HIV/Aids, malaria and other diseases – are among the most off track, and the World Health Organisation estimates a funding shortfall of up to €14bn for these three goals this year alone.
In the face of such a significant shortfall, Eva Nilsson, from Stop AIDS Alliance, argued that an FTT “is a viable option to fill a huge funding gap which could help the EU meet its obligations both at home and abroad”.
The revenue generated by the FTT must, however, be clearly allocated towards poverty eradication and supporting public health. It should also be additional to already pledged ODA. “Although agreement on an EU-level FTT would represent welcome progress, it should by no means be seen as an easy option or a ‘get out clause’ for member states failing to meet their existing funding commitments,” adds EPHA secretary general Monika Kosinska.
Moving towards an EU FTT
French president Nicolas Sarkozy has publicly backed the FTT, and has put the issue at the top of the agenda for his country’s presidency of the G8 and G20. The European Commission, which represents the EU at the G20, supports an FTT at the global level but is widely expected to come down in favour of the financial activities tax (FAT) at EU level in its upcoming impact assessment. This approach would be disappointing as the FAT is not capable of generating the same level of revenue as the FTT – estimated by the Commission to be around €25bn for the EU27 – and does not tackle the kind of harmful speculative trading which caused the crash.
Although progress towards an FTT has faltered at global level, with opposition from the likes of Canada and the United States, French finance minister Christine Lagarde indicated earlier this week that France would continue to push for the tax at EU-only level or among a “coalition of the willing” including countries such as Japan and Norway.
The European Parliament has previously supported calls for an EU-only FTT in the absence of wider global agreement, but earlier this month a majority of Conservative and Liberal MEPs rejected a proposal to this effect in Anni Podimata’s report on innovative financing when it was voted on in the economic and monetary affairs committee. With 21 votes against to 21 in favour, the proposal was deleted from the draft report but the vote could not have been closer.
The S&D group will re-table the proposal when the report goes to plenary in March and Greek S&D MEP Podimata believes the Parliament has a responsibility to endorse an EU FTT. “EU citizens are paying the price financially for the crisis, and the effects are being felt even more forcibly in developing countries,” she says. “It’s time for the EU to prove itself as a global leader by moving towards a financial transaction tax at this level. Not only does the FTT have the potential to significantly bolster desperately tight national budgets, it can also protect against the prospect of a similar financial crisis in future.”