November 11, 2009
International Monetary Fund,
700 19th Street, N.W.,
Washington, D.C. 20431
Dear Mr. Strauss-Kahn:
Re: Request for civil society participation in IMF study on how the financial sector can help pay for the bailouts
In September, the Group of 20 (G20), at their summit in Pittsburgh, mandated the International Monetary Fund (IMF) with preparing a report ahead of the next G20 summit in June 2010 to consider “how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.”
We, the undersigned civil society organizations, citizens’ groups, social movements and other stakeholders, welcome this initiative and look forward to working with you on this important matter. We are writing with four requests:
- As part of its report, the IMF should pay serious consideration to proposals for financial transaction taxes as a key tool for ensuring that the financial sector helps pay for government bailouts of their industry.
- The IMF should establish a formal process for engaging civil society views in this initiative, both by setting up a clear channel for submitting written input as well as organizing public dialogues. The IMF has created such mechanisms for civil society dialogue in the past on other important matters, such as debt restructuring and cancellation, and more recently in the governance reform process at the IMF that you initiated.
- The study should thoroughly explore the possibility of taxes on currency transactions and on all financial transactions, taking independent evidence from economists and academics who have looked at the feasibility of such taxes, modeling a range of different rates and analysing the technical feasibility and impact on different markets of unilateral implementation of such taxes.
- The IMF should be open to the work of other international bodies that are focusing on this issue, such as the Taskforce on International Financial Transactions for Development, recently created by French Foreign Minister Bernard Kouchner under the auspices of the Leading Group on Solidarity Levies for Development.
Background on Financial Transactions Taxes
Since the outbreak of the crisis, a number of organizations and countries have pointed to the need for a financial transaction tax (FTT) to both help stem the speculative flow of a broad array of financial instruments and also generate resources for public goods. This alone would not resolve the crisis, of course, but it could play an important role in raising funds to compensate those who ended up paying for the resulting “bail-outs”.
Unlike a currency transaction tax or a “Tobin tax,” which just covers currency transactions, an FTT would have a much broader tax base, covering all kinds of financial assets such as shares, bonds, securities and derivatives, and both domestic and cross-border transactions. Technically the FTT can be levied easily and at very low costs since all stock exchange transactions are captured by electronic platforms. A simple electronic tag would automatically transfer the tax to the tax office. At a tax rate of 0.5 percent, it would also help curb speculative transactions that add little to the real economy.
Such taxes already exist. The most prominent example is the British “Stamp Duty”, which levies a 0.5 percent tax on the nominal price of any purchase of shares of UK companies and which has not lead to substantial tax evasion or the weakening of the City of London. Country specific financial transaction taxes exist in Austria, Greece, Luxembourg, Poland, Portugal, Spain, Switzerland, Hong Kong, China, and Singapore. The U.S. state of New York levies a stamp duty on Wall Street (New York Stock Exchange and NASDAQ) on all firms based there. Claims that financial transactions taxes are not feasible should therefore not be a serious concern.
Growing Support for Financial Transactions Taxes
As you are no doubt aware, many politicians have recently voiced their support for taxing financial transactions, among them French President Sarkozy and German Chancellor Merkel. U.S. President Barack Obama has also noted the need for “a Financial Stability Fee on the financial services industry so Wall Street foots the bill -- not the American taxpayer”. Your predecessor, former Managing Director Horst Köhler, now President of Germany, said at Chancellor Merkel’s swearing-in ceremony that the new German government should support an FTT. The U.S. House of Representatives is exploring the idea of an FTT, and European Commission President Barroso and Lord Turner, Chair of the British Financial Services Authority, are also favourable to the idea.
We want to add our voices to these calls for financial transactions taxes and to offer our input as you work to prepare a report of significant value to the G20. We consider this a critical component of the G20’s goal of ensuring the integrity and stability of our global financial system.
Sarah Anderson from the Institute for Policy Studies, Peter Wahl from Weltwirtschaft, Ökologie & Entwicklung (WEED) and Fraser Reilly-King from the Halifax Initiative Coalition will be following up with you on this request.
Africa-Europe Faith and Justice Network
Asamblea de Cooperación por la Paz (ACPP)
ATWWAR (Advocates and Trainers for Women)
Bretton Woods Project
British Musicians' Union
Campagna per la Riforma della Banca Mondiale
Campaign for America's Future
Canadian Union of Postal Workers
Center for a World in Balance
Communication Workers Union
Debt and Development Coalition Ireland
Development Alternatives with Women for a New Era
Dominican Leadership Conference
Ethical markets Media ( USA and Brazil)
European marches against unemployment
European Network on Debt and Development
Financial Action Network
Foreign Policy In Focus
Fundación Ágora S. L.
Ghana National Association of Teachers
Global Policy Forum Europe
Global Social Justice
GMB trade union
Halifax Initiative Coalition
Institute for Policy Studies, Global Economy Project
Integrated Social Development Centre (ISODEC)
International Trade Union Confederation
International Federation of Business and Professional Women
International Food Workers Trade Union
Jubilee USA Network
KEPA (Service Centre for Development Cooperation)
Make Poverty History Canada
Medical Mission Sisters
New Rules for Global Finance Coalition
Norwegian Church Aid
Norwegian Forum for Environment and Development
Norwegian People's Aid
Osservatorio Italiano sulla Salute Globale (OISG)
Public Services International
Services Employees International Union
Sisters of Charity Federation
Somali Community Literacy Center
Stamp Out Poverty
Tax Justice Netherlands
Tax Justice Network
Tax Research UK
The Corner House
Third World Institute (ITeM)
Third World Network
Trade Union Advisory Committee to the OECD
Trades Union Congress (TUC)
UN Association of Australia
War on Want
WEED - World Economy, Ecology & Development Assoc.
Workers' Educational Association
World Development Movement
World Federalist Movement
World Party Organisation
IMF Executive Directors