Editorial (ICSW Journal): July 3, 2001

"Taxing Currency Transactions – From Feasibility to Implementation"
Pam Foster

Taxing currency transactions (CTTs) have been discussed at various multilateral fora including the World Summit on Social Development (WSSD) and the recent G-20 meetings held in Ottawa. The most concrete outcome to date, however, has been from the WSSD process at which an inter-governmental study on this subject was mandated. The Halifax Initiative, a Canadian coalition of non-governmental organizations and a key advocate of CTTs, held a conference in October 2001, "Taxing Currency Transactions – From Feasibility to Implementation” to spur actions which will lead to the adoption and implementation of CTTs.

The conference also aimed to broaden the dialogue beyond the narrow range of banking, institutional, and political actors and interests currently represented in discussions to reshape the “global financial architecture” in the wake of the Asian, Russian, Brazilian, and subsequent financial crises. To this end, the conference brought together activists, citizens, academics, government officials and Parliamentarians. Over 60 people representing 18 countries attended the conference.

Furthermore, the conference took place during a moment of political opportunity as the issue of global financial stability and increased public mobilization, particularly in Europe, sparked ministerial interest in France, Germany and at the Presidency of the European Union. As the topic of CTTs continues to move from the fringes to the mainstream of political debate, the need for informed debate among the movement’s leadership was increasingly essential to ensure its on-going ability to set the terms of the global public debate.

Participants spent the first day of the conference sharing knowledge in five key areas:

  • Technical Feasibility;
  • Tax Rate Efficiency;
  • Political Feasibility;
  • Implementation - Legal and Administrative Arrangements; and
  • Revenue Partition and Redistribution.

In the first panel, Dr. Rodney Schmidt from Canada presented research that shows that CTT’s are feasible if applied to the settlement of the transaction rather then to the trade itself. Dr. Dean Baker from the USA argued for the need to also regulate the derivatives market to ensure that currency speculators do not devise new instruments to evade the tax.

During the second panel on the tax rate, there was an interesting debate between Dr. Spahn, Germany, who argued for a higher rate of tax only during financial crises and Bruno Jetin, from ATTAC France, who argued for a consistently higher rate to reduce currency speculation and the likelihood of financial crisis from occurring.  It was concluded that these different opinions are reflective of whether one sees the role of the tax as primarily to have a dampening effect on currency speculation or to raise maximum amounts of revenue.

The panel on political feasibility explored several issues, including the application of a CTT on the euro. Dr. Huffschmid from Germany argued that the application of a European CTT is feasible and desirable. Jacques Chai Chomthongdi from Thailand highlighted the need for more research, public education, alliance building and campaigning to ensure that CTTs are put on the political agenda in developing countries.

Many interesting ideas were discussed in the fourth panel on legal and administrative frameworks for CTTs, with some presenters pointing to the possible use of existing models such as multilateral environmental treaties including their financial mechanisms and international trust funds. The War on Want, UK, proposed the establishment of a Global Development Commission made up of independent but elected advisors, with a governing body and a compliance body.

There was consensus in the fifth panel that the revenue generated must be targeted towards social development, the development and maintenance of global public goods, and fighting poverty and environmental degradation.

The second day of the conference focused on the development of shared and complementary strategies to advance the CTT debate globally. Discussion on Day Two recognized that the on-going success of the CTT populist movement remains contingent upon the continued and expanding engagement of citizens, academics, institutions and political officials.

The success of the citizens' movement to date in support of CTTs is the result of collective efforts to debate, discuss and resolve questions internally and to advocate strategically, across cultures and around the world. The movement has been able to address critics who assert that Tobin-type taxes are not technically feasible, but new challenges have emerged including questions around implementation and revenue partition. As the political debate continues to evolve rapidly, the need for the CTT movement to further develop both intellectually and strategically is critical to address outstanding issues including avoidance through derivatives instruments, CTT effect on volatility, CTT appropriate rate levels, and addressing implementation questions.

Pam Foster works with the Halifax Initiative based in Ottawa.

For further information about the Halifax Initiative, please see their web-site at: www.halifaxinitiative.org

A set of conference papers is available from: info@halifaxinitiative.org.