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Thursday, 08 April 2010

Big push in Europe for the Financial Transaction Tax

Recently citizens and civil society organizations all over Europe have been stepping up the push for the introduction of a Financial Transaction Tax (FTT). According to calculations by Stephan Schulmeister from the Austrian Institute of Economic Research (WIFO), a small tax rate of just 0.1% on financial transactions would yield globally US$ 287bn a year, even in a scenario where the higher costs of financial transactions reduce their volume. Even a unilateral introduction in Europe could yield US$ 130bn. This additional tax income is crucial in the current situation where many European governments are running fiscal deficits of 10% of GDP and more in response to the crisis, and the IMF estimates that by 2014 government debt ratios for the G20 countries will reach on average 120% of GDP. Innovative funding like this is also one way to address the shortfalls in financing development and climate change mitigation and adaptation. Allocating just a small share of the expected FTT revenues to development cooperation would already fill the funding gap of US$ 21bn between what donors promised in 2005 and what the Organisation for Economic Co-operation and Development (OECD) currently estimates for the 2010 outcome. It could also cover the costs of up to US$ 100bn annually for climate change adaptation in developing countries. The European NGO Confederation Concord demands that the FTT should raise funds for financing development beyond the existing commitment made by European governments to provide 0.7% of GNI as Official Development Assistance (ODA).

Source: Eurodad