UN calls for international tax to raise $400 billion to finance development needs
Financial needs of developing countries have long outstripped the willingness and ability of donors to provide aid
New York, 5 July 2012 –The United Nations is proposing an international tax, combined with other innovative financing mechanisms, to raise more than $400 billion annually for development and global challenges such as fighting climate change.
In its annual report on global development, World Economic and Social Survey 2012: In Search of New Development Finance, (WESS 2012) launched today, the UN says, in the midst of difficult financial times, many donor countries have cut back on development assistance. In 2011, for the first time in many years, aid flows declined in real terms.
The survey finds that the financial needs of developing countries have long outstripped the willingness and ability of donors to provide aid. And finding the necessary resources to achieve the Millennium Development Goals and meet other global challenges, such as addressing climate change, will be tough, especially for least developed countries.
The need for additional and more predictable financing has led to a search for new sources – not as a substitute for aid, but as a complement to it. A number of innovative initiatives have been launched during the past decade, mainly to fund global health programmes aimed at providing immunizations, AIDS and tuberculosis treatments to millions of people in the developing world. The UN survey finds that while these initiatives have successfully used new methods to channel development financing to combat diseases, they have hardly yielded any additional funding on top of traditional development assistance.
"Donor countries have fallen well short of their aid commitments and development assistance declined last year because of budget cuts, increasing the shortfall to $167 billion,” according to the lead author of the survey, Rob Vos. “Although donors must meet their commitments, it is time to look for other ways to find resources to finance development needs and address growing global challenges, such as combating climate change.”
“We are suggesting various ways to tap resources through international mechanisms, such as coordinated taxes on carbon emissions, air traffic, and financial and currency transactions,” Mr. Vos said. “Such taxes also make economic sense, as they help stimulate green growth and mitigate financial market instability. In short, such new financing mechanisms will help donor countries overcome their record of broken promises to their own benefit the world at large.”
Realizing the potential
The WESS finds the scope for scaling up or replicating existing initiatives is too limited to meet the needs for development financing in the coming decades. Hence, new sources will need to be tapped. Experts who carried out the survey see potential to raise over $400 billion per year through the following mechanisms:
· a tax on carbon dioxide emissions in developed countries: a tax of $25 per tonne would raise an estimated $250 billion per year, collected by national authorities, but earmarked for international cooperation;
· a tiny currency transaction tax of one half of a “basis point” (0.005 per cent) on all trading in four major currencies (the dollar, euro, yen and pound sterling), which could yield an estimated $40 billion per year for international cooperation;
· earmarking a portion of the proposed European Union financial transaction tax (which is expected to raise up to €55 billion or $71 billion per year) for international cooperation;
· regular allocations of IMF special drawing rights (SDRs) and use of “idle” SDRs could yield about $100 billion per year for the purchase of long-term assets which would then be used as development finance.
The survey says such mechanisms are technically feasible and economically sensible. They could readily provide the means of meeting urgent global development financing needs. Vos said that “realizing the potential of these mechanisms will require international agreement and corresponding political will, both to tap sources as well as to ensure allocation of revenues for development.”
The survey also suggests other options which could be explored but would require further technical elaboration, such as a billionaire’s tax, which would consist of a small tax of, say, 1 per cent on individual wealth holdings of $1 billion or more with the revenue destined to finance internationally agreed global development purposes.
“The survey provides important suggestions to generate solid financial underpinnings for the actions to be undertaken in follow up to the agreement reached at the recent United Nations Rio+20 Conference to achieve global sustainable development,” according to Sha Zukang, Under-Secretary-General of the UN Department of Economic and Social Affairs.
The survey points out that the design of appropriate governance and allocation mechanisms is crucial for innovative financing to ultimately meet development needs and contribute to financing the post-2015 development agenda.
The beginnings of innovative development finance – health as a testing ground
In recent years, a number of mechanisms have been developed under the rubric of innovative development finance, mostly in the field of health. These include the International Finance Facility for Immunization, Advance Market Commitments for pneumococcal vaccine, the Affordable Medicines Facility - malaria, Debt2Health and Product Red.
The social survey confirms that these mechanisms have improved aid effectiveness and incentivized research; contributed significantly to the financing of the Global Fund to Fight AIDS, Tuberculosis and Malaria and especially UNITAID and GAVI; and they have contributed to fighting AIDS, tuberculosis, malaria and vaccine-preventable diseases.
However, the survey also finds that the funds channeled through these programmes have mainly come from existing aid budgets, rather than generating additional resources. Overall, a total of $5.8 billion has been channeled through these innovative mechanisms since 2006, but only a few hundred million dollars can be counted as additional to existing aid.
To date, innovative financing resources in the field of health have generally been allocated for vaccines and pharmaceutical products to fight specific diseases, such as HIV, tuberculosis and malaria. This has brought important benefits to specific areas of disease control. The WESS warns, however, that in some cases these global funds have bypassed broader national health priorities in developing countries and contributed to the fragmentation of international support to health systems in low-income countries. The survey concludes that instead of an array of disease-specific funds, it would be better to focus on finding new resources for more general budget support for health systems in developing countries in need and to consolidate the existing disease-specific disbursement mechanisms into a single “global fund for health”.
Climate financing mechanisms
The potential for innovative development finance is particularly high in the area of fighting climate change, according to the survey. Innovative development finance mechanisms have raised about $1 billion for climate change, although disbursements have, so far, been relatively limited. Innovative financing for climate change has the potential to increase substantially in the coming years, as the European Union shifts to auctioning emissions allocations, potentially generating some $20-35 billion in annual revenues. However, with the exception of Germany, European Union members have, so far, been unwilling to commit to allocating a specified proportion of these revenues to international programmes, in part due to domestic financial pressures. Nonetheless, $3-5 billion per year could be raised if other countries were to match Germany’s commitment.
Increasing finance for climate change-related uses in recent years has given rise to a proliferation of separate climate funds, with limited coordination among them. The WESS says it is important to avoid further fragmentation as traditional and innovative financing increase. As in the case of health, a more effective approach would be to consolidate disbursement mechanisms. The survey concludes that the international agreement to establish the Green Climate Fund could serve as the starting point for such a consolidation.
The World Economic and Social Survey is an annual report produced by the United Nations Department of Economic and Social Affairs. Each year, it focuses on a different issue.
The report is available at http://www.un.org/en/development/desa/policy/wess/index.shtml
Press Availability Following the Friends of the Syrian People Ministerial Meeting
Secretary of State
I want to thank President Hollande and Foreign Minister Fabius for hosting this conference. In addition to the conference that the French Government very ably ran, we had a chance to discuss a wide range of other issues, including Iran, Afghanistan, and the Eurozone, the problems in the Sahel, the upcoming conference in Tokyo for civilian support for the Afghan’s decade of transformation, and so much else. And as always, we reaffirmed the strong bonds of friendship between our two nations.
But of course, the main focus today was on Syria. Now that we have a plan for an inclusive, Syrian-led, democratic transition, the challenge is how to implement it. We all know that Assad will not easily halt his war or give up his power. It will take serious and sustained pressure from both the broader international community and those nations that have particular influence in Damascus.
The United States and the Friends of the Syrian People are doing our part. First, we are working with a broad cross-section of the Syrian opposition, which came together this week in Cairo to support a detailed blueprint for implementing Kofi Annan’s transition plan. And the United States continues to provide non-lethal assistance to help the opposition organize and communicate.
Second, we are depriving Assad of the financial resources to continue waging his war on the Syrian people. Our Sanctions Working Group has called for all states to freeze assets of senior regime officials, restrict transactions with the commercial and central banks, and embargo Syrian oil. The regime is becoming increasingly isolated from the international financial system. Syria’s currency and foreign reserves have collapsed. And we’ll be pushing for even stronger implementation of sanctions at the third Working Group meeting in Doha.
Third, as Joint Special Envoy Annan has requested, we are pursuing a new UN Security Council resolution that demands implementation of the Annan plan and imposes real and immediate consequences for non-compliance, including additional sanctions under Chapter 7.
Increasing pressure in all these ways is critical because no transition plan can progress so long as the regime’s brutal assaults continue. That’s why the entire world is now looking to those few nations that still have influence in Damascus. They need to step up and use all their leverage to make sure Assad sees the writing on the wall. Sitting on the sidelines – or even worse, enabling the regime’s brutality – would be a grievous mistake.
And by the same token, let me say to the soldiers and officials still supporting the Assad regime, the Syrian people will remember the choices you make in the coming days, and so will the world. The new Syrian Justice and Accountability Center is now up and running, compiling evidence of serious violations of human rights. And we are seeing high-level defections every day. It is time to abandon the dictator, embrace your country men and women, and get on the right side of history.
Before I close, let me add that today I also had a candid and productive meeting with Palestinian Authority President Mahmoud Abbas. We discussed how to build on his exchange of letters with Prime Minister Netanyahu. I underscored that the United States remains absolutely committed to the goal of a comprehensive peace in the Middle East based on two states for two peoples with peace and security. In a time of upheaval across the region, we cannot lose sight of the critical importance of resolving this issue.
So I will be following up on this discussion when I meet with Israeli officials in Jerusalem in about 10 days. And with that, I’d be happy to take your questions.
MS. NULAND: We’ll take two today. Let’s start with CNN, Elise Labott, please.
QUESTION: Thank you, Madam Secretary. You mentioned that high-level defections are happening. We understand that a high-level brigadier general has defected and could be on his way to Paris. What information do you have on that, and what do you think of this high defection? There’s been a lot of criticism, Madam Secretary. You heard in the hall today from the Syrian opposition that there’s a lot of talk, a lot of conferences, but not a lot of action. And how do you think that this Annan plan and these conferences are going to get – change that military equation on the ground and stop the violence anytime soon? Thank you.
SECRETARY CLINTON: Well, thank you. With respect to the defectors that we are seeing, it is important that there is this increasing stream of senior military defectors including, reportedly just yesterday, a very close and long-time ally of both Assad and his father. Because if people like him, and like the generals and colonels and others who have recently defected to Turkey are any indication, regime insiders and the military establishment are starting to vote with their feet. Those who have the closest knowledge of Assad’s actions and crimes are moving away, and we think that’s a very promising development. And it also raises questions for those who remain in Damascus still supporting this regime, still propping it up, about their own choices ahead of them, because we have no doubt about the outcome here.
We know that the Assad regime will fall. The question is how many more people have to die before that happens. And we want to see those who are on the inside hasten the day when a true transition can begin and the Syrian people have a chance to chart their own democratic future. So these defections send a message to Assad, but perhaps more importantly, they send a message to the people who are still left, which I hope they hear and heed.
With respect to the opposition, as you know, we’ve been working very closely with the opposition for a number of months. The stories we heard today, both in the public session and in private encounters, were deeply distressing. We share the opposition’s outrage at lives that are lost, at people who are tortured, at women who are abused and raped. It’s just extraordinary, the unspeakable violence that this regime is imposing on its own people. That’s why we are working hard to unify the international community behind a credible political transition plan.
You have to be for something, and now we are. We have a plan that is supported by the P-5 coming out of Geneva, by the Friends of the Syrian People, and most importantly, by Syrian opposition leaders and backed up by global economic sanctions. And we have to be honest about this. For too long, the Syrian opposition has been divided. And those divisions have only given comfort to Assad and his allies and supporters inside of Syria and outside. But finally, we are overcoming these obstacles. As I said this morning, really, it was not until early this year that the opposition began calling for any kind of help. And we are in absolute support.
And we think what happened in Geneva, with Russia’s and China’s support, was significant. For the first time, the opposition was put on the same level as the Assad regime. The creation of a transitional governing body with full executive authority has to be formed by mutual consent, which obviously means that Assad and the people around him are not going to be part of it. We’re now going to work to support what came out of Cairo to build on their compact articulating the rights of all Syrians. And we’re going to work hard to make sure that sanctions are enforced because we think that’s also a very strong message to Syrians who still support the Assad regime or who haven’t chosen sides.
But we have to do more. And I was very clear this morning. I mean, countries that are not implementing sanctions need to be implementing the sanctions. No travel, no trade, no comfort for this regime. We have to block financial flows. We have to block the kind of support that Syria continues to receive. And we have to go to the Security Council and now take the document from Geneva, supplemented by the work that the opposition themselves did in Cairo, and put real consequences behind those words by working to get a Chapter 7 resolution that will help us end the violence and have consequences for those who continue to inflict suffering and death on the Syrian people.
So I think the sequence of events over the last week has been very powerful and has sent a very clear, unified message. And now we have to follow up and keep the pressure on.
MS. NULAND: Last one today, Jacques Hubert-Rodier from Les Echos.
QUESTION: I just wanted to know – you met President Francois Hollande today and I wanted to know what is your assessment, if there is any change of priorities of a French – of a new French Government?
And on Syria, did you talk about any further measures, including sending arms to the opposition or even a military intervention with President Francois Hollande? Thank you.
SECRETARY CLINTON: Well first, we are delighted to be working with President Hollande and his team. President Obama and I were thrilled to welcome him to Washington and then to Chicago just a few days after his being sworn in as President. We consider France a very close partner, a strong ally, and we have already rolled up our sleeves and gotten to work. We think we face a lot of opportunities and challenges ahead, but we are confident that there’s a great deal of understanding and commitment on both sides to work together to meet the extraordinary range of international issues that we face today.
Our cooperation has already been excellent on Syria, Iran, Afghanistan, Mali, the Sahel region, at NATO. And, I mean, for us, we will never forget France is our oldest ally, our very first diplomatic mission, and we work very hard to make sure that we maximize the potential of our relationship. And we are going to broaden and deepen our working partnership with members of the Hollande government, but I think it’s off to a great start.
And as to your other question, we discussed a full range of issues, but not that one. I think that when it comes to Syria, we do not want to further militarize this conflict. We want to bear down on the approach we are taking together, because, of course, Foreign Minister Fabius was a very active participant at our day-long meeting in Geneva and instrumental in helping to shape the communique that was a result of those efforts. We want to really get a maximum effort on the points that I’ve already mentioned and see how much more pressure we can apply to the regime and hasten its departure.
MS. NULAND: Thank you all very much.
SECRETARY CLINTON: Thank you.