*{Global Taxes for Global Priorities - Global Policy Forum - Social and Economic Policy 

Global Taxes for Global Priorities
By James A. Paul and Katarina Wahlberg
Published by Global Policy Forum, WEED
and the Heinrich Böll Foundation
March 2002

This paper has been prepared in conjunction with a roundtable on “Global 
Taxes for Global Priorities” held in New York on May 5, 2001 by Global Policy 
Forum, WEED, and the Heinrich Böll Foundation.

1. Introduction}
Many crises threaten a globalizing world, including international financial 
instability, growing worldwide poverty, global warming, and epidemic diseases 
that know no boundaries. Solutions require intense international cooperation 
and stronger global institutions. Progress will especially demand large new 
financial resources tens of billions of dollars to finance global public 
health, take steps towards environmental sustainability, and build programs to 
insure education and livelihoods for all. 

Unprecedented wealth and productive capacity are available today, more than 
ever before in human history.Since 1950, gross world product has multiplied 
seven times and product per capita nearly three times, both in real terms. Yet 
the global economy organizes a vastly unequal division of the world’s 
resources, promoting private consumption and accumulation over public 
well-being. Development aid funds have declined, urgent global projects have 
stalled for lack of money and worthy international organizations like the UN 
have fallen prey to budget caps and assessment shortfalls. 

Bold and innovative steps are urgently needed to tap the world's wealth. 
Global taxes offer the most promising approach. International projects and 
organizations cannot depend solely on contributions from nation states, much 
less rely on private charity or business “partnerships.” They must develop 
independent revenue sources to fund public purposes at the global level.
Taxes amounting to just 1% of world GDP would raise over $400 billion per 
year. Such a sum would meet many urgent needs while placing a very modest 
burden on the world’s richest consumers. 

Advocates have offered dozens of proposals for global taxes, but two have 
gained special attention: a tax on the carbon content of commercial fuels 
(often called a Carbon Tax), as a means to stop global warming, and a currency 
transaction tax (often referred to as a Tobin Tax), to reduce speculation and 
global economic instability. 

Some day, an international political authority will levy global taxes, but at 
present a robust authority of this kind, with sufficient accountability and 
enforcement powers, does not exist. So initially, national governments must 
levy such taxes as part of an international tax agreement. Part of the funds 
levied will go towards global purposes, while part will be kept in the 
national treasury. Transition towards truly global taxation will await 
strengthened and democratized global institutions, sometime in the future, but 
today we must make a start along the road. 

 
*{2. Background}
Global taxes are not a new idea. Legal scholar James Lorimer referred to the 
idea in his 1884 book Ultimate Problems of International Jurisprudence. Many 
of the most famous economists of the earlier twentieth century likewise 
considered it, including Alfred Marshall, John Maynard Keynes, and James 
Meade.*{[1]} Around the time of the United Nations’ founding in 1945, economists 
and policy makers often spoke of the need for robust international economic 
policy to avoid the dangers of renewed depression and war. To them, global 
economic management and even global wealth redistribution seemed not only 
desirable but a logical necessity.*{[2]}

In the 1950s and 1960s, global taxes receded from view, a casualty of the Cold 
War and fervent opposition from the United States government and many large 
companies. But in the 1970s the idea gained momentum again, among academics, 
NGOs and a few progressive governments, along with environmental concerns and 
the concept of a "global commons." Some economists proposed that taxes or fees 
on use of these resources could help manage and preserve the world’s 
atmosphere, land and oceans. 

The year 1972 proved a watershed. The UN Conference on the Human Environment 
recommended that the international community consider global taxes. In the 
same year, economist James Tobin first proposed his global tax on currency 
transactions, while the Club of Rome, in its famous Limits of Growth report, 
discussed global taxes to fund international organizations.*{[3]}
 
In 1977 the Washington-based Brookings Institution convened a number of 
meetings on the subject and that same year a UN conference referred to global 
taxes as a possible source of revenues to combat desertification.*{[4]} Soon 
after, the United Nations Environment Programme (UNEP) published two major 
reports on global taxation *{[5]} and in 1980 the Brandt Commission issued an 
important, widely-read report that reviewed a number of global tax proposals. 
The Commission favored taxes on international trade, and its report concluded 
that “ a system of universal and automatic contributions would help to 
establish the principle of global responsibility, and would be a step toward 
co-management of the world economy.”*{[6]} 

During the 1980s, nations actually established one global tax – a levy on deep 
seabed mining, incorporated in the UN Law of the Sea Convention.*{[7]} Scholars 
and policy advocates continued to discuss other forms of global taxes in 
international conferences and other forums.*{[8]} In 1992, Ruben Mendez of the 
United Nations Development Programme (UNDP) published a pioneering treatise on 
International Public Finance, giving prominence to tax proposals. 
Subsequently, a number of prestigious reform studies raised the issue as a 
step to strengthen global institutions. 

The Commission on Global Governance (1995) proposed a tax on currency 
transactions, a tax on multinational corporations, and “user fees” for the 
global commons, including taxes on international airline tickets, ocean 
maritime transport and ocean, non-coastal fishing. *{[9]} The Dag Hammarskjöld 
Foundation report on Renewing the United Nations System (1994), *{[10]} the 
Independent Commission on Population and Quality of Life (1995), *{[11]} the 
Global Commission to Fund the United Nations (1995) *{[12]} and the South Centre 
report on UN reform (1996)*{[13]} also offered proposals and analysis on the 
subject. Even within the precincts of the International Monetary Fund, a 
serious working paper on currency transaction taxes emerged.*{[14]}
 
Several governments, including Austria and the Netherlands, studied the issue 
and quietly supported it. Within the UN system, UNEP organized a conference 
and UNDP set up a research project on global taxes, which soon resulted in an 
influential volume on The Tobin Tax (1996).*{[15]} Secretary General Boutros 
Boutros-Ghali gave the subject a highly visible boost in a famous speech at 
Oxford University (1996) and the UN Economic and Social Council held a full 
debate on the subject (1996).*{[16]} 

Finance ministries in many rich countries continued to react negatively, 
however. Corporate executives also looked askance and conservatives in the 
United States Congress, led by Senator Jesse Helms, strongly objected.*{[17]} 
Many in Congress claimed global taxes threatened US sovereignty and they 
accused tax advocates of favoring authoritarian world government.*{[18]} In 1996 
Congress considered a bill making payment of US dues to the United Nations 
conditional upon the UN abandoning efforts that “develop, advocate, promote or 
publicize proposals” that impose taxes or fees on US citizens.*{[19]} The bill 
eventually was signed into law on November 26, 1997.*{[20]} 

In a period of financial crisis for the United Nations, this threat 
immediately stifled discussion in UN forums. UNDP quietly ended its research 
into the issue. Secretary General Boutros Boutros-Ghali lost his bid for a 
second term (December, 1996), in part for this reason.*{[21]} The United States 
also blocked European proposals for environmental taxes at the talks on global 
climate change. The US eventually imposed a weak alternative – an emissions 
trading system – in the pathmark Kyoto Protocol, of December, 1997.

But Washington, like the mythical King Canute, could not hold back the tide. 
Interest in the subject continued to grow in every country, including the 
United States itself, due to emerging awareness of AIDS, global warming, and 
other impacts of globalization on people’s lives. Citizens increasingly 
understood that the agreements signed at the UN global conferences of the 
1990s would remain meaningless without the large sums needed for 
implementation.*{[22]}
Well-known NGOs, like Friends of the Earth and War on Want, took up the cause. 
Grassroots movements sprang up and soon found broad public support.*{[23]} Trade 
unions developed a growing interest, including the worldwide Public Services 
International.*{[24]} Scholars discussed it. Conferences proliferated. 
Parliamentarians held hearings. Even the influential U.S. journal Foreign 
Affairs gave it space.*{[25]} Increasingly, parliaments and political leaders 
endorsed the idea.*{[26]} 

In the run-up to the UN Financing for Development (FfD) world conference, the 
Zedillo Panel Report of 2001 gave global taxes unexpected attention. 
Commissioned by the UN Secretary General and written by an international group 
of eminent persons, the Report concluded that “there is a genuine need to 
establish, by international consensus, stable and contractual new sources of 
multilateral finance” – that is, global taxes. While recognizing the strong 
opposition to this idea, the panel stated bluntly that the alternative, 
short-sighted option, leads the world towards a far more dangerous and unhappy 
future. The report goes on to consider two proposals. It views a tax on 
international currency transactions as interesting but possibly flawed. It 
recommends instead a tax on carbon emissions, which it says would be based on 
the “sound and fair principle of ‘make polluters pay.’”*{[27]} Taking into 
account the cautious language of all such reports, one could say that the 
Zedillo Panel gave a solid endorsement to the idea of global taxes. 
A Technical Note published about the same time by the UN Secretariat reviewed 
three of the most promising tax proposals.*{[28]} Various side events and 
government reports have considered global taxes too, including an excellent 
report on “global public goods” by the Swedish Ministry of Foreign 
Affairs.*{[29]} 

The time for concerted action has come. The international community cannot 
allow the United States government to hold the world hostage and block 
vitally-important progress. Like-minded governments and citizen groups must 
advance together towards the goal of global taxes. The UN has the authority 
and capacity to address this agenda, and so to pave the way for a just and 
sustainable global future. 


*partie=titre 3. Major Proposals *partie=nil 
Global taxes can have three parallel purposes: (1) policy steering, (2) 
revenue raising, and (3) income re-distribution. Tax proponents ordinarily 
give priority to one of these purposes over the other two. But we will 
consider the triad, because public support hinges on all three. 
We will consider in detail the two major proposals – a carbon tax and a 
currency transaction tax – looking at the policy steering aspects, revenue 
raising potential, and redistribution impact of each, as well as their 
problems, prospects and progress. 

Some of the most important tax proposals hope to create a disincentive – that 
is, to discourage harmful activities – as taxes on cigarettes and alcohol do. 
Taxes on carbon emissions and currency speculation are both of this type. 
Specialists refer to a “Pigovian” tax, after the economist A.C. Pigou who 
first theorized about it, pointing out that market prices do not reflect the 
true costs to society and the environment of these activities. 

Such a tax has special features. If it succeeds very well in discouraging the 
unwanted activity, it will lose its effectiveness as a source of revenue. 
Further, it may produce its highest potential revenue at a relatively low 
percentage rate, creating a tradeoff between revenue and disincentive. As the 
rate rises, revenue is likely to fall because use of the taxed item will 
decline. The interaction between the tax rate and tax revenues will depend on 
what economists call demand elasticity: how quickly demand will decline as 
prices rise.
 
Demand for fuels like oil responds relatively quickly to price changes – when 
oil prices spiked in 1979-80, use declined significantly and world carbon 
emissions declined three years to a total 19% below the trend, before climbing 
again as oil prices fell.*{[30]} As increasing carbon tax rates would push final 
prices ever higher, demand would fall, though we don’t know how far and how 
fast this would change.*{[31]} 

Other proposals do not have this Pigovian steering function. They tax 
activities that are considered positive, such as email traffic and world 
trade. Unlike the Pigovian proposals, whose advocates hope the taxes will have 
a direct policy impact such as reduced global warming, these proposals 
typically seek to raise revenue and may aim at policy goals on the spending 
side – for example, they may seek funds for development, environmental 
protection, poverty eradication, or other programs of the United Nations.

*partie=titre Carbon Tax  
Policy Goal: Combating Global Warming *partie=nil
Global warming, caused by human activity, brings potentially far-reaching 
climatic and ecological disruption. If not halted, these changes will result 
in rising sea levels, desertification and increases in the frequency and 
severity of storms, floods and drought. Such new climate conditions will lead 
to the spread of disease, human displacement and even the disappearance of 
heavily-populated areas that will submerge below the rising oceans.*{[32]} 
The authoritative Intergovernmental Panel on Climate Change (IPCC) believes 
that average temperatures across the world will climb by several degrees over 
the century. The Panel notes that already icecaps and glaciers are melting, 
sea levels are rising, and extreme weather events are occurring more 
frequently. The IPCC concludes that most recent warming is “attributable to 
human activities.” It warns of “irreversible damage” and “rising 
socio-economic costs.”*{[33]} UNEP estimates that negative effects of global 
warming could soar to a cost of $300 billion per year.*{[34]} Carbon dioxide, 
released from burning of hydrocarbon fuels like oil, coal and natural gas, is 
by far the most important “greenhouse gas” driving this process.*{[35]} 

A tax on carbon content of these commercial fuels could combat global warming 
by reducing carbon dioxide emissions.*{[36]} Authorities would levy such a tax in 
proportion to a fuel’s carbon content. Companies extracting the fuels would 
pay the tax, passing it along to consumers as a price increase. The tax would 
fall most heavily on coal, the fuel with the most carbon content, while 
natural gas would be taxed the least.*{[37]} Since fuel use is sensitive to 
price, especially over time, higher prices would have considerable impact on 
consumption. The tax would be based on the “polluter pays” principle. 
Depending on the tax rate, a carbon tax could substantially reduce the use of 
commercial carbon fuels and create price-incentives for transition to 
sustainable energy sources, such as wind, solar and geo-thermic power.*{[38]} If 
phased in over twenty years or more and coordinated with other public policy 
measures, the tax could promote a steady transition to sustainable energy 
alternatives. 

Global energy use has shifted in recent decades towards more efficient, 
lower-carbon fuels. But from 1950 to 1999, world GNP increased so dramatically 
that carbon release grew from 1.6 to 6.3 billion tons per year.*{[39]} Scientists 
expect further emission increases in the decades ahead, unless nations adopt 
strong policies. An IPCC study projects 12 billion tons in 2020, doubling the 
present rate, in the absence of substantial new measures.*{[40]} 
Since carbon dioxide accumulates in the atmosphere, and it has already reached 
a dangerous level, carbon release should be reduced dramatically, as quickly 
as possible. 

Slowing or ending the growth of emissions is not enough. A high carbon tax 
could take the emissions rate back down, especially if combined with 
eliminating subsidies for carbon fuels.*{[41]} High taxes will be required to 
reach deep emissions cuts and to promote a rapid shift to sustainable energy, 
even as worldwide energy demand and use increases. 

*partie=nil Revenue Potential *partie=nil
A global carbon tax, levied at a rate that would substantially discourage 
carbon emissions, would produce very large revenue. There are many assumptions 
that enter revenue projections, notably the demand elasticities of carbon 
fuels and the time-lag that would allow alternative energy systems to come 
into widespread use. 

A UN paper estimates that a tax amounting to $21 per ton of carbon (the 
equivalent of 4.8 cents per gallon of gasoline) would yield $125 billion 
annually.*{[42]} This tax rate would not be high enough to stop worldwide growth 
of carbon fuel, but it might be the beginning of a phased-in tax that would 
rise steadily over a period of years. 

According to the IPCC, taxes of $100 per ton of carbon could reduce emissions 
up to 5 billion tons by 2020. Taking into account projected increases in use, 
however, that reduction would still leave the world with slightly more 
emissions than at present!*{[43]} A higher tax rate, perhaps $200 per ton or 
more, is required to produce real reductions. Taking a $200 tax, and then 
assuming a hypothetical world-wide 50% decrease of carbon emissions from 
present levels, we could project revenue of $630 billion per year after a 15 
year phase-in period.*{[44]} This sum parallels a model by the Organisation for 
Economic Cooperation and Development (OECD) projecting carbon tax revenue of 
$750 billion by 2020, or about 1.3 percent of gross world product in that 
year. Taxes raised in the US would represent about 20% of the world total.*{[45]} 

Nations have separately levied carbon-type taxes for many years, especially 
taxes on gasoline. According to an OECD study, petroleum tax revenues in 
Germany in 1998 totaled about $38 billion, while in Britain in 1995, similar 
levies on transportation fuel came to $14 billion.*{[46]} This demonstrates the 
large revenue that a carbon tax can mobilize. And it shows that nations can 
move ahead with high-revenue joint carbon taxes without a universal global 
agreement. 

A phased-in global carbon tax would probably produce its highest revenue in a 
stage when carbon fuel use remained high. Later, tax rates would rise and 
revenue eventually decline. Assuming a long phase-in time and continued 
residual use of carbon fuels, the tax would produce hundreds of billions of 
dollars in annual revenue over a period of several decades.
 
*partie=titre Re-distribution *partie=nil  
All taxes change the distribution of income and well-being. In a world of 
great poverty and huge income disparities, global taxes should aim to 
redistribute. Yet global tax advocates have not given enough attention to 
distributional issues, which include the initial levy, its policy steering 
aspect, and its spending results.*{[47]} 

The levy outcome of a carbon tax can be mildly regressive by raising the costs 
of cooking fuel, heating fuel, and transportation fuel for poor people. Higher 
fuel costs for farm equipment (such as irrigation pumps and small tractors) 
can also put pressure on marginal farmers. 

There have been many distribution studies in rich countries. These suggest 
that distribution effects of carbon/energy taxes have ranged from mildly 
regressive to mildly progressive, depending on local patterns of energy use. 
Countries that have adopted these taxes, such as Denmark, the Netherlands and 
Germany, have typically included exemptions or re-distributional subsidies 
that lessen the impact on the poorest families and make the overall burden of 
the taxes mildly progressive. *{[48]} 

Some critics also argue that poor countries depend more on inefficient energy 
systems which rich countries have already left behind, so that a tax of this 
kind would impose heavier transition costs on the economies least able to 
adapt. According to one set of projections from the mid-1990s, China by 2015 
would be emitting as much greenhouse gases as the United States, and India 
would be emitting more than Japan.*{[49]} 

China has confounded standard assumptions, though, by rapidly decreasing its 
carbon emissions after 1996, including a major shift away from coal, even 
while achieving rapid economic growth.*{[50]} This shows that poor countries can 
make major changes at an early stage of their industrial development and need 
not follow the European/US path of energy use.*{[51]} 

Distributional effects in the global economy are far more complex than 
distribution within a single country. Cold-weather regions are more likely to 
be negatively affected than warm-weather ones, thinly-populated than 
thickly-populated, and so on. The world’s poorest two billion people scarcely 
use commercial fuels at all*{[52]} and most poor countries import all or most of 
their commercial fuel. So carbon fuel use and income from fuel-extraction vary 
greatly from one country to another. A Saudi prince, a US coal miner, and an 
investor in Toyota would probably lose income from falling demand for carbon 
fuels. Gas producers would benefit in the short run at the expense of oil 
producers and especially coal producers. 

To insure a more progressive levy outcome, a carbon tax could be raised on a 
multi-tier basis, with higher rates for rich countries and lower rates for 
poor countries. Studies are needed to insure both effectiveness and fairness 
of the tax and to win the greatest public support for the tax plan. 
The policy outcomes suggest a more strong-ly progressive effect of the tax, 
especially in the long term. By mitigating global warming, the tax would 
protect the poor who are especially exposed to negative effects such as 
disease, drought, storms, and flooding. Peasants living in flood-prone 
Bangladesh would certainly be great beneficiaries. Citizens of small island 
nations, threatened by the rise of sea levels, would benefit immeasurably. The 
IPCC has concluded unequivocally that “The impacts of climate change will fall 
disproportionately upon developing countries and poor persons within countries 
and thereby exacerbate inequities in health status and access to adequate 
food, clean water and other resources.” *{[53]} 

Other policy dimensions of distribution arise. As a carbon tax is imposed, 
prices of solar and wind generators of electricity would likely decline due to 
intensified research and longer production runs. This could bring help bring 
affordable energy to poor people in remote villages and raise their standards 
of living. Carbon taxes would lessen urban sprawl and so reduce pressure on 
the land of poor farmers. Carbon taxes could also lower health costs, by 
reducing, among other things, particulate pollution (the OECD report, in 
discussing distributional effects, notes that poor people are nearly always 
more exposed to the bad effects of emissions).*{[54]} 

The spending outcomes promise important re-distributional effects as well. 
Assuming that the nations collecting the tax would agree to forward a 
substantial portion like 50% to a global fund, strongly redistributive effects 
could result. Such a fund could target support for low-income households. The 
fund could also help to better distribute world energy resources by helping 
poor communities obtain low cost solar panels and wind generators. 
Considering all three aspects of the tax (levy, policy, spending), on a global 
basis, the tax promises to be progressive in its overall effect. Advocates 
must devote more attention and study to the distributional issue, however, to 
insure that progressive effects will be maximized and harmful regressive 
effects in local cases reliably overcome. 

*partie=titre Problems and Likely Opposition *partie=nil  
Some opponents argue that the Kyoto regime of emissions trading takes care of 
carbon emissions, making the idea of a carbon tax obsolete. This is not true. 
Emissions trading is a seriously flawed concept, that gives advantages to the 
biggest polluter countries and the big energy companies.*{[55]} At best it will 
have only a limited capacity to reduce worldwide greenhouse gas emissions. A 
carbon tax is a fairer, more efficient policy tool that would speed progress 
towards Kyoto and Rio goals. 

By raising prices of commercial hydrocarbon fuels, the carbon tax 
theoretically might boost use of wood as an energy source, along with 
increases in demand for nuclear and hydroelectric energy, as substitutes for 
taxed fuels. Though wood is a carbon fuel, authorities cannot tax most of its 
use, because consumers tend to harvest and use it directly for their own 
needs. Nuclear power and hydro-electricity are not carbon emission sources at 
all. A shift towards these three energy forms would put pressure on forests, 
raise the danger of radioactivity and dam more of the world’s wild rivers. But 
other offsetting factors would likely enter the equation. 

Carbon taxes would promote development of cheaper sustainable energy sources. 
Electricity prices from wind mills and solar thermal generators are now 
beginning to be competitive with carbon-fuel generated power. They may already 
be cheaper than some nuclear generated energy prices and may eventually be 
cheaper than hydroelectric.*{[56]} Probably, then, falling prices for sustainable 
energy will undercut substitution effects from these unsustainable energy 
sources and steadily lower their use.
 
Some critics argue that carbon taxes would be difficult to collect, but few 
tax experts take this argument seriously. Tax authorities would levy carbon 
taxes directly on the sale of carbon fuels, thus collection of carbon taxes 
would be as easy as value-added taxes or sales taxes. Because VAT taxes are 
already in widespread use, and because sellers almost everywhere use 
computerized systems, adding this collection item would not impose much 
difficulty or extra cost. European experience suggests a collection cost of 
well under 1%*{[57]} and a UN paper affirms that in most cases “administrative 
and compliance costs of the extra taxation would be negligible.”*{[58]}
The carbon tax’s main problem is not technical but political – the staunch 
opposition of a number of enormously powerful global industries, notably 
transportation equipment manufacturers like General Motors and Ford, petroleum 
producers like ExxonMobil and Royal Dutch Shell, and energy producers like 
Enron and Dynergy, all closely tied to the carbon-energy system. Among the 
largest companies in the world, they have great political influence, 
particularly over two key players: the United States and Britain.*{[59]} 
These companies sell mass-consumption products, however, so they are 
vulnerable to consumer attitudes and pressures. BP’s advertising campaign, 
which insists that the company is looking ”Beyond Petroleum,” reflects 
corporate awareness of this looming challenge and offers hope that mass 
campaigns and consumer pressure can blunt corporate opposition. A Greenpeace 
campaign against Shell in Europe provides a glimpse of this strategy, which 
may have caused Shell and some other companies to soften (though not abandon) 
their opposition to environmental policies.

Oil and gas producing nations also oppose this tax, which they see as a threat 
to their production revenues. Russia, Britain, Norway, Mexico, Nigeria, 
Indonesia, Iran and the United States are all producers with a big stake in 
the carbon energy system. But rents, taxes and other revenues from fuel 
extraction do not always better the lives of ordinary citizens. Further, most 
of the world’s nations lack domestic coal, oil and gas. They have plenty of 
sun and wind, though, for sustainable power generation. They would clearly 
benefit from a shift in the global energy system and they might eventually 
prove to be strong supporters of a carbon tax proposal. 

*partie=titre Progress *partie=nil  
The European Union has been interested in coordinated energy policies, 
including taxes on petroleum and even carbon taxes.For this reason, EU 
negotiators favored a tax-based regime at Kyoto, rather than the 
emissions-trading system that ultimately emerged.Because the EU is already 
relatively energy efficient, globally-agreed carbon taxes would be less of a 
burden than in the US.*{[60]} In fact six European states, five of them EU 
members – Denmark, Finland, Germany, the Netherlands, Norway and Sweden, – 
have already levied energy/carbon taxes at the national level. The EU is some 
distance from implementing its own carbon tax, but its members, including even 
Britain, favor energy taxes as a path towards energy efficiency and 
environmental stewardship. 

No mass campaign has emerged to promote a carbon tax, but the broad-based 
environment movement has shown considerable interest in this idea, lobbied for 
it and produced policy papers and proposals. Friends of the Earth, War on 
Want, and the Wuppertal Institute, among others, have actively promoted 
it.Networks of environmental groups have pressed for it at global conferences. 
A regular series of Global Conferences on Environmental Taxation have 
emerged.*{[61]} The OECD, UNEP, UNDP, and the Commission on Sustainable 
Development have all made or commissioned studies.*{[62]} Many scholars and 
environmental scientists have supported the idea, one of the most prominent 
being Richard Cooper, Boas Professor of International Economics at Harvard 
University, whose essay advocating a carbon tax appeared during 1998 in 
Foreign Affairs, an influential US foreign policy journal.*{[63]} 
The UN Zedillo Panel, whose members from a range of countries included Robert 
Rubin, former US Secretary of the Treasury, endorsed the carbon tax, saying 
that it had ”promise” and that governments should give it serious 
consideration. 

Public awareness of global warming is growing steadily. Political leaders are 
moving towards serious action.Pressure in favor of the carbon tax will 
continue to mount. Governments should see the World Summit for Sustainable 
Development in Johannesburg (August-September 2002) as an important 
opportunity for action. A political bloc is forming that will steadily 
overcome opponents and implement the tax.
 
*partie=titre Currency Transaction Tax *partie=nil 
Policy Goal: Reducing Currency Speculation and Financial Instability
Every business day, traders at banks around the world exchange more than $1 
trillion in currencies. Less than 5% of these transactions are necessary to 
cover international trade, travel and long-term investments. Additional trades 
cover risk management and financial market liquidity. The large remainder – 
probably well over half – represents speculative and destabilizing activity 
such as speculative arbitrage, “noise trading” and high volume speculation on 
major currency price changes.*{[64]} 

Currency speculation can drive down the price of local currencies, 
precipitating financial crises such as those in Mexico (1994), East Asia 
(1997-98), Russia (1998), Brazil (1999), Turkey (2000) and Argentina (2001). 
This has caused broad instability in the global financial system and harmed 
millions of people, when local economies suffered deep declines.*{[65]} Central 
Banks could not defend their own currencies during these speculative attacks, 
because speculators could mobilize enormous loans for short-term, high-profit 
moves in the markets.
 
Even the speculators sometimes lose in this high-stakes betting game. The 
USA-based Long Term Capital Management hedge fund gambled hundreds of billions 
of dollars on a computer-driven currency trading scheme. For a time, the fund 
made very high profits. Then markets changed course and the firm suddenly 
collapsed in October 1998, with tens of billions in paper losses. Last-minute 
intervention by the US Federal Reserve Bank, which organized a bailout by 
creditors, barely prevented a serious international financial crisis.*{[66]} 
Nearly two decades earlier, in 1972, Professor James Tobin of Yale, later a 
Nobel laureate, first anticipated the dangers of open currency markets and 
proposed a small tax on currency trades in order, as he said, to “throw sand 
in the wheels” of the markets, slow down speculation, promote long-term 
investing, and give governments more autonomy in their monetary policy.*{[67]} 
After the demise of the Bretton Woods currencysystem in the early 1970s, new 
market conditions*{[68]} and very high profits from currency trading pushed 
volumes steadily upwards – from a turnover of $16 trillion per year in 1970 to 
nearly $30 trillion in 1983. 

As financial companies adopted computer-driven trading systems in the 1990s, 
the pace of trading grew still faster, because complex programs required huge 
trading volume to realize profits on small-margin trades. By 1992, annual 
trading had grown to $148 trillion. In that year, speculation by George Soros’ 
Quantum Fund forced the devaluation of the British pound, while making a 
profit of more than $5 billion in just a few days.*{[69]} By 1998, feverish 
speculation by computer-driven investors had pushed the level of transactions 
to $373 trillion.*{[70]} 

Since then, trading has fallen to about $322 trillion by 2001, due to the 
introduction of the Euro, banking concentration and other factors.*{[71]} Growth 
will probably resume, though. Even if future growth slows, overall volume will 
remain dangerously high and prone to speculative runs and damaging volatility. 

A Currency Transaction Tax (CTT or “Tobin Tax” as it is often called) could 
lower trading volume, speculation and volatility by imposing a small tax of 
less than 1% on each trade. *{[72]} Such a tax would not slow world trade in 
goods and services or long-term investments, but it would reduce destabilizing 
trading seeks profits from small differences in currency prices. Some think 
that a tax as low as 0.1% would have a positive slowing effect without 
damaging necessary market operations. 

Paul-Bernd Spahn *{[73]} contributed an important new element to the proposal in 
1996 by suggesting that the tax should include a second, much-higher rate that 
would come into force whenever signs of major speculation arise – when price 
movement exceeds a pre-established limit. This second-tier tax would act like 
stock market circuit-breakers” that stop trading when sudden large price 
movements occur. This tier would discourage speculative currency runs, for 
which a low rate would not be sufficient disincentive. 

The two-tier tax would favor long-term investments and loans, discouraging 
short-term activity and sudden, destabilizing price changes. Rapid, irrational 
“herd behavior” by speculators could no longer do serious damage. The tax 
would provide stability to the global financial system and promote conditions 
more favorable for development. 

*partie=titre Revenue Potential *partie=nil 
Taxes on currency transactions could raise large revenue, even if they lowered 
transactions by as much as 50%. Researchers have estimated revenue based on 
various assumptions such as different tax rates and different impacts on 
trading levels. Estimates also make different assumptions about how many 
transactions would escape taxation (through use of new financial instruments, 
tax havens, etc.). A tax of 0.2%, with a hypothetical 50% reduction in 
transactions from the current level of about $300 trillion would result in 
annual revenue of about $300 billion. A tax of just 0.05% with a 50% 
tax-induced reduction of transactions and non-participation by the U.S. and 
other major trading centers (further 50% reduction) would still produce a 
hefty $38 billion.*{[74]} 

Eventually currency transactions may diminish as the dollar and the euro gain 
wider use and national currencies decline. In the meantime, the CTT will prove 
a very large source of revenue for global public purposes.
 
*partie=titre Re-distribution *partie=nil 
The levy outcome of a currency transaction tax would yield far more 
progressive results than the carbon tax, because the CTT directly affects 
mostly financial companies. Travelers and workers sending remittances would 
pay an extremely small share of the tax, a sum more than offset by falling 
currency exchange transaction costs as banks wire themselves together across 
the globe. While non-financial firms can be expected to pass along some of the 
tax’s effect in the form of higher prices, only very slight additional costs 
would be borne by poor persons.
 
The policy outcome of the CTT would be strongly redistributive, since the tax 
would dampen speculation and avoid financial and economic instability that 
impose such a heavy cost on ordinary people in affected countries. 
The spending outcome has a problematic aspect anticipated by Tobin, since 
currency exchange transactions are concentrated in just a few countries. 
Britain accounts for 32% of all global currency trades, the United States 
ranks second at 18%, Japan third at 8% and Singapore fourth at 7%. The US, 
Japan and the European Union together account for about 75% of global trades, 
with Switzerland, Hong Kong and Singapore accounting for another 15%. 
A tax entirely kept by these governments would not promote global 
re-distribution, though it would promote re-distribution within their borders. 
An effective plan for a global CTT should incorporate national contributions 
to a global fund that would redistribute tax revenue away from financial 
center countries in favor of low-income nations. Tobin originally proposed 
that all the tax revenue should go to an international fund and Spahn’s 
proposal for a European CTT takes the same position. Even if only 25-50% of 
the revenue would benefit poor nations, the result would be strongly 
progressive on a global basis. 

Overall, then, this tax promises progressive re-distributional effects in all 
three of its outcomes.
 
*partie=titre Problems and Opposition *partie=nil 
Critics sometimes insist that tax authorities would find it difficult to 
collect a CTT, especially because traders would invent means to avoid it 
through (1) creation of non-taxable instruments, such as special derivatives, 
and (2) use of tax-free havens such as offshore centers to shelter their 
trades. Rodney Schmidt, Paul Bernd Spahn and other tax proponents have made 
convincing proposals that would block these and other avoidance schemes, by, 
among other things, (1) taxing inter-bank or ”wholesale” transactions at the 
point of settlement and (2) imposing a penalties on transactions with 
jurisdictions not imposing the tax. The literature on this subject is very 
substantial.*{[75]} 

Because the tax could be levied by making small changes in computer program at 
a few major financial institutions, the cost of setting up and administering 
the tax would be small and compliance easy to monitor.*{[76]} A UN paper 
concludes that this tax would be “administratively inexpensive” and that its 
“compliance costs would be low.”*{[77]} 

Could the tax be levied in the absence of the United States, where opposition 
seems most intractable? Some believe that only a universal tax would be 
possible, but many advocates think that a group of countries could introduce 
the tax, just as stock transfer taxes were unilaterally introduced some years 
ago. Because the European Union and Japan-Singapore-Hong Kong together 
represent about 75% of global transactions, advocates hope that this zone 
could begin with a joint tax, which many other countries would join. The 
German Development Ministry’s Spahn report proposes a currency tax within the 
EU and Switzerland. *{[78]} 

The tax faces strong opposition from financial institutions, especially those 
most actively engaged in currency trading. They make billions of dollars in 
profits each year through their currency desk operations*{[79]} – including both 
lower-margin arbitrage and higher-margin speculation. The bankers fear much of 
these profits would disappear under such a tax. Since these financial 
institutions are among the world’s most powerful companies, they can mobilize 
great political opposition. Many of these companies depend on mass consumer 
markets, though, so pressure from consumer campaigns might lessen their 
opposition, tilting the balance towards tax proponents.
 
*partie=titre Progress *partie=nil 
Though Tobin first proposed the idea thirty years ago, it has only recently 
gained worldwide attention. A large and growing NGO movement has propelled the 
proposal forward, eliciting increasing support from political leaders, 
parliamentarians, trade unionists, journalists and intellectuals. 

NGO initiatives sprang up almost simultaneously within a short period.*{[80]} 
ATTAC, a mass membership campaign, has now grown faster than even optimistic 
advocates expected. Affiliates have sprung up in 26 countries and ATTAC now 
boasts thousands of members and it wields noticeable political influence. 
Other organizations with strong programs and leadership roles on CTTs include 
the Halifax Initiative (Canada), the Tobin Tax Initiative (US), War on Want 
(UK), International Cooperation for Development and Solidarity (Europe), 
11.11.11 (Belgium), WEED (Germany), AFRODAD (Africa) and Focus on the Global 
South (Thailand).*{[81]} 

The NGO alliance includes a large presence of trade unions and church groups. 
The World Council of Churches endorsed the currency transaction tax at its 
world assembly in 1998. The German and US trade union confederations and the 
International Confederation of Free Trade Unions now support the tax, as do 
Public Services International and the International Metalworkers’ 
Confederation. 

As the movement has picked up steam and gained mass backing, politicians and 
public figures have expressed growing interest. Jacques Delors, former 
President of the European Commission has commented favorably, as has Gareth 
Evans, former Foreign Minister of Australia; and Barber Conable, former 
President of the World Bank.*{[82]} President François Mitterrand of France 
promoted it at the World Summit for Social Development in 1995. 

More recently, the Finnish and Belgian governments have backed it. The 
President of Brazil and the Prime Minister of India have given it their 
blessing.*{[83]} The German government has shown an interest and the Swedish 
Central Bank has said it may be necessary.*{[84]} Even the UK Chancellor of the 
Exchequer has said his government has an “open mind” on the matter.*{[85]} And 
George Soros, the man who made billions by speculating against currencies, has 
now come out in favor.*{[86]} 

French Prime Minister Lionel Jospin announced in a television speech on August 
2001 that his government supports the CTT. A cartoon in a Paris satirical 
weekly showed Jospin’s rival, the French president, saying contentedly “Chirac 
rhymes with ATTAC!”*{[87]} 

More than 800 parliamentarians from five continents have signed an 
international appeal favoring the tax. In March, 1999, the Canadian parliament 
voted overwhelmingly for a CTT motion.*{[88]} In November 2001, the French 
National Assembly passed a law adopting the tax in principle.*{[89]} In a number 
of other European countries, parliamentary questions and draft bills call for 
the tax or for a study of its feasibility. The UK House of Commons has held 
several debates on the matter and a six-party coalition of backbenchers 
pressed the government for action.*{[90]} In the European Parliament, a draft 
resolution favoring a CTT missed a majority by only six votes in early 
2000.*{[91]} Even members of the US congress have introduced a supportive 
bill.*{[92]} 

Governments are clearly getting serious about the possibility of this tax. It 
has moved into the realm of expert ministry studies and preparatory 
investigations. The Finance Ministries of France and Finland published studies 
in 2000 and the UK Treasury is doing its own investigation (2001-02). In early 
2002, the German Development Ministry published an important report by 
Paul-Bernd Spahn on the CTT and the European Commission issued a major study 
on globalization that referred at length to the potential of a currency 
tax.*{[93]} 

Though many powerful forces still stand opposed to taxing currency 
transactions, the movement is gaining ground. Those that formerly opposed it 
unconditionally, like the IMF and the Bank for International Settlements, now 
grudgingly admit that it may have merits. A softening position by the UK 
Treasury shows how far we have come. Each new currency crisis adds momentum 
and a sense of urgency. Soon, perhaps, a serious move towards adoption may get 
under way. 

*partie=titre 4. Other Proposals 
Aviation Fuel Taxes *partie=nil  
Although airplane travel currently accounts for only about 3% of global carbon 
emissions, it is the fastest growing source of emissions. The 
Intergovernmental Panel on Climate Change (IPCC) expects airplane travel to 
account for 15% of all carbon emissions in 2050.*{[94]} Currently, aviation fuel 
used in international flights is exempted from fuel taxes under an 
international convention, putting other less polluting forms of transportation 
like sea and rail at a disadvantage.*{[95]} 

A number of studies by the Organization for Economic Cooperation and 
Development (OECD), the International Civil Aviation Organization (ICAO) and 
the IPCC have examined taxes on aviation fuel as a means to mitigate global 
warming and other negative effects on the atmosphere including the ozone 
layer. They have concluded that a tax on aviation fuel would make passenger 
and freight charges somewhat more expensive, though a 25% fuel tax, if 
entirely passed along to customers would only add only about 5% to user costs 
and reduce demand by 5-10%. Such increased fuel costs would, however, create a 
powerful incentive to airlines to use fuel-efficient engines and more 
efficient aircraft design. Higher fuel prices would also increase incentives 
for a more efficient air traffic control system and other factors affecting 
airline emissions.*{[96]} 

The EU has actively discussed an aviation fuel tax, beginning with the Dutch 
Presidency of 1997. Dutch transport minister Annemarie Jorritsma suggested 
that the European Union introduce an aviation fuel tax unilaterally. In 
December 2000, the European Parliament’s Economic and Monetary Affairs 
Committee confirmed its support for a recommendation to allow the Member 
States to impose a tax on domestic and intra EU flights. The Committee also 
urged the Commission to pursue negotiations through the International Civil 
Aviation Organization with a view to amending the 1944 Chicago Convention, 
which allows an exemption from taxes on air fuel.*{[97]} Australia and the US 
oppose a worldwide levy on aviation fuel, but many other countries have 
expressed interest. 

ICAO data shows fuel costs to be somewhat less than 20% of total airline 
turnover, which in 1998 was close to $300 billion per year. This would suggest 
a fuel cost of about $50 billion per year. A 1998 study cited by the IPCC 
found that a tax of 25% would halve the rate of growth of fuel use, while not 
having substantial impact on passenger demand.*{[98]} Such a tax would produce 
revenues of $12.5 billion per year.
 
This tax would generate only modest revenue compared to the carbon tax, but 
such may be its attraction. It would certainly generate far less opposition 
and might be a low-profile precedent for later, more ambitious tax plans. The 
decline of air travel in the wake of September 11, 2001, increased existing 
industry difficulties world wide. Until the finances of the industry improve, 
governments are unlikely to agree to a new tax on aviation fuel. But 
projections of rapid growth and consolidation of the industry suggest that it 
will soon again emerge as highly profitable, at which time, a tax may again 
seem promising. 

*partie=titre Email/Internet Taxes *partie=nil 
An email or internet tax, sometimes known as a “bit tax,” seeks to introduce a 
tax on the amount of data sent through the internet. A person sending 100 
emails a day, each containing a 10-kilobyte document, would pay a tax of just 
1 cent, according to one proposal. 

This tax does not seek to discourage use of email (though it would to some 
degree). Rather, its proponents hope to raise funds that would be spent to 
narrow the “digital divide” between rich and poor. Revenues would help make 
email and web access available in poor communities and low-income countries. 
The UNDP Human Development Report 1999 mentioned such a tax.*{[99]} UNDP 
estimated that globally in 1996, such a tax would have yielded $70 
billion.*{[100]} Since internet users now frequently send data-rich photos and 
large documents, transfer rates are far higher than in 1996 and the number of 
internet users has grown enormously. For these reasons, a tax should be set at 
a rate well below the one UNDP first proposed. Still, it could produce a large 
revenue and impact users only modestly. 

In 1998, the United States persuaded the OECD countries to impose a moratorium 
on internet taxation, but the idea continues to stir interest and on February 
12, 2002, EU finance ministers approved sales taxes on internet 
transactions.*{[101]} New technology and changing politics may bring this 
proposal swiftly forward. 

*partie=titre Tax on World Trade *partie=nil  
The Brandt Commission proposed this tax two decades ago, seeking to raise 
revenues on the value of world trade. William Evan, Professor Emeritus at the 
Wharton School of Business, revived the idea in an article published in 1997 
in the New York Times.*{[102]} Like the email tax, this tax does not seek to 
discourage the activity it taxes. Rather, it hopes to raise international 
revenue based on the idea that international trade and prosperity relies on 
international institutions working for peace and general well being. 
With volume of world trade at $7.3 trillion in 1998, a tax of 0.5% on the 
value of all trade activity in both goods and services would result in $37 
billion of total annual revenue.
 
*partie=titre Tax on Use of the Oceans and Earth’s Atmosphere/International Air Transport *partie=nil  
 
Environmental advocates favor taxes that impose costs on the use of the 
“global commons.” These taxes could reduce the negative impact of heavy human 
use of the oceans and the atmosphere and create funds for research and 
preservation of these precious resources. Such taxes could levy international 
air traffic, international maritime traffic, and possibly also the military 
use of the oceans and atmosphere, since military use causes considerable 
damage and pollution. 

Advocates have most often proposed a tax on international air tickets and 
airfreight charges. All the major studies have raised this idea and a recent 
UN paper included it among the three most promising proposals.*{[103]} Such a tax 
is already in force at the national level. Governments and airport authorities 
commonly levy charges that airlines pass along in ticket prices or airfreight 
bills. Such charges amounted to $6.7 billion in the United States alone in 
1998. One estimate based on 1989 data, suggested that a 1% tax could yield 
revenue of $1 billion.*{[104]} The Air Transport Action Group reports total 1998 
world airline industry revenues at $307 billion (including both domestic and 
international flights), of which international revenues were somewhat over 
half. 

According to our calculations, a tax of 1% on all air transport revenues would 
yield about $3 billion while a tax on international fights alone would yield 
approximately $1.2 billion.*{[105]} A UN study arrives at a somewhat smaller 
revenue conclusion, estimating that 1% tax on all international passenger 
tickets and airfreight charges would yield $2.2 billion, of which $800 million 
on passenger tickets alone.*{[106]}
 
*partie=titre Tax on the International Arms Trade *partie=nil  
Disarmament advocates have long proposed a tax on the international arms 
trade, in hopes of reducing its volume and raising revenues to promote 
disarmament and other peaceful purposes from this deadly merchandise. 
Proposals for this tax have come from various sources over the years including 
the government of Saudi Arabia, UNEP, the UN Committee for Development 
Planning, the Brandt Commission and the UNDP Human Development Report.*{[107]} 
The international arms trade, only a very small fraction of overall world 
trade, totaled approximately $25-30 billion in the period 1990-2000, if we 
take the trade in ”major conventional weapons” as the benchmark.*{[108]} A tax of 
5% on this trade would yield about $1.2 billion, assuming a small trade 
reduction due to the effects of the tax. 

The United Nations Register of Conventional Arms, decided in 1991 by the 
General Assembly, gathers information on the arms trade that could plausibly 
be used as a basis for such a tax levy, though information would have to be 
gathered on a mandatory basis and with sales value as well as volume. 

*partie=titre Fines for Ocean Dumping *partie=nil  
Oil tankers flush out their tanks with seawater, polluting the oceans with 
great amounts of oil each year. Cruise liners dump polluting refuse into 
pristine seas. Coastal cities dump garbage at sea. These and many other forms 
of dumping are causing growing pollution of the world’s oceans, accelerating 
the decline of fish stocks, causing the death of coral reefs and leading to 
many other serious problems.*{[109]} 

Advocates have proposed fines, to be imposed on those who dump – very severe 
fines that would make dumping extremely expensive, even if only sporadically 
discovered. When set at high rates, the total revenues collected from this 
source would still probably not be large. If each year international 
authorities imposed five thousand fines of $100,000 each, the total revenue 
would reach $500 million This proposal would require a complex global 
monitoring process that would itself be expensive, reducing net revenue from 
the tax to a modest level, though doubtless also making progress against the 
plague of dumping and ocean pollution.
 
*partie=titre Other Proposals *partie=nil  
Advocates have advanced many other proposals for global taxes. These include: 
a tax (or fee) for commercial deep-sea fishing; a “parking fee” for 
earth-orbiting satellites, a fee for the use of the electronic spectrum (for 
radio/television/mobile phones/etc.), a tax on the profits of transnational 
corporations, and a tax on international advertising. 

*partie=titre 5. Common Issues and Themes *partie=nil 
While global tax proposals include many widely different ideas, they share 
certain common themes. In what follows, we address some of the most important 
issues, to explore the problems and potential of global taxes as a policy 
tool. 

*partie=titre Organization and Oversight
Harmonization & Sovereignty *partie=nil 
Global taxes can only gain legal standing through a treaty agreement between 
nation states, in an “internationally-harmonized tax regime.” Each 
participating nation will raise the taxes through its own taxing authority, 
based on a globally agreed tax rate and taxing policy plan. Each will then 
pass an agreed portion of the revenue along to an international organization 
for spending at the global level. This arrangement does not require 
fundamental changes in international law and so it avoids a direct challenge 
to state sovereignty that a global taxing authority would pose. States can 
keep jealous control over their taxing powers.
 
A treaty body that supervises a tax will assume authority that is partly in 
competition with the authority of national legislatures and tax authorities, 
but it will remain subject to the will of participating governments. 

*partie=titre Accountability and Oversight *partie=nil  
Though nation states will initially collect and decide (through 
inter-governmental consultation) on the spending of global taxes, new citizen 
pressures for global oversight will emerge. Citizens in diverse nations will 
want robust institutions (not just traditional diplomacy) to oversee tax 
policy, decide on spending priorities and, most importantly, provide 
accountability. These citizens will ask for a more representative system, more 
democratic global political institutions, on the principle of “no taxation 
without representation.” 

Critics of global taxes often focus on the kind of institution that would 
supervise and spend the funds at the global level. US Congressional critics 
warn that the institution(s) would be bureaucratic, corrupt, and 
authoritarian. These concerns are exaggerated but they are not entirely 
unreasonable. A successful global tax system must provide assurances that 
monies will be efficiently administered, well protected from dishonesty, 
carefully accounted-for, responsive to public feedback, and disbursed with 
care in the very best traditions of public service.
 
We should oppose any plan that would put the monies in the hands of the 
International Monetary Fund, the World Bank, or some other secretive agency 
unduly influenced by Washington. A strong accountability plan must guard 
against creating a Frankenstein monster that we would later sadly regret.

*partie=titre Administrative Costs, Enforcement Issues *partie=nil   
The cost of raising revenue and the difficulty of enforcement vary greatly 
from one tax to another. Authorities find income taxes complex and expensive 
to administer and increasingly difficult to enforce, while sales or 
value-added-taxes are simpler and far cheaper (though less progressive). 
The main global tax proposals meet the criteria of cost-effectiveness and ease 
of enforcement. Many experts believe that a currency transaction tax would be 
extremely simple and cost-effective, because it would be levied through a 
computer program installed in a relatively small number of banks and financial 
institutions. A carbon tax would be more complex because it would involve more 
different transactions and more varied reporting. But levied on the initial 
sale of just three basic fuels (coal, petroleum, natural gas), tax authorities 
should find it relatively simple, as it would be similar to the sales taxes 
that nearly every tax authority imposes. Aviation fuel taxes, a levy on 
airline tickets, and a tax on seabed mining would similarly appear to be 
simple and cost-effective. More complex and costly proposals, such as email 
taxes and fines for ocean dumping, have understandably attracted less support. 

A system of collection based on national tax authorities would run into 
problems in states beset by national crisis, war, or a collapsing central 
authority. States like the Democratic Republic of Congo, Angola, Sierra Leone, 
Somalia, Sudan, and Afghanistan would doubtless not be able to collect taxes 
as part of a global tax regime. No tax regime manages a perfect collection 
record, however, and these weak-points would arise in places where generally 
only very small amounts of tax would be owed. A well-developed tax regime 
could, in any case, provide international assistance in cases (for example, 
oil taxes levied in Angola) where national authorities would be weak and major 
revenue leakage possible.
 
*partie=titre Must Global Taxes be Universal *partie=nil 
In light of strong opposition from the United States and to a considerable 
extent from Britain as well, global taxes will not at first include all 
nations. Global taxes would function better if levied universally, though, 
minimizing avoidance and the “free rider” effect. 

Non-participant countries may offer tax-avoidance opportunities. Some experts 
fear that currency traders would migrate to tax-free locations, including 
offshore centers, to escape the CTT, or that energy buyers would favor markets 
in tax-free jurisdictions to avoid the carbon tax. Well-designed tax plans can 
minimize these problems, though, as experts like Schmidt have shown. 

There remains the “free rider” effect, that offers tax-related benefits to the 
non-participant nation at no cost to its citizens. US citizens, for example, 
would benefit from reduced global warming created by a global carbon tax 
regime that the U.S. government did not join and that its citizens did not pay 
for. Still, U.S. buyers of French wines, German automobiles, and British 
raincoats would all indirectly pay for the taxes. In a globalizing world, no 
rider can be absolutely “free.” 

Global taxes must include as many nations as possible. But experts believe 
that avoidance and free-rider problems would not wreck the tax regime or even 
greatly disadvantage the participants. In the case of a global but 
non-universal carbon tax, participant nations would promote their own economic 
efficiency, convert towards a renewable energy system, improve their land-use 
and build new industries of the future like solar cells and hydrogen-powered 
motors. They would act with a future prospect, in contrast to non-participant 
nations that would mortgage their future in favor of a few years’ profligate 
energy consumption.
 
Within international law, very few treaties, conventions and bodies embrace 
all nations. The International Criminal Court and the Kyoto Protocol are 
important initiatives that will go forward without the participation of the 
United States and some other significant parties. Global taxes are likely to 
follow a similar path. Advocates now recognize this and develop proposals 
based on non-universal options. On the carbon tax, a recent Swedish study 
comments optimistically: “the absence of universal agreement would not make 
the operations impossible or necessarily unacceptable for those otherwise 
willing to take part.”*{[110]}

Non-participant states may eventually join the tax regimes, for a variety of 
reasons. They may come to see advantages or shift when pressured by their own 
citizens. Tax regimes may be set up with mild penalties for non-participants. 
Non-participants may also be lured into joining because they would want to 
take part in the goal-setting, oversight and benefits of the resulting global 
funds. 

*partie=titre Tied Revenues vs. a Common Pool *partie=nil  
Global tax proposals often suggest uses for the resulting revenues, like an 
environmental protection fund, debt reduction, or a universal education fund. 
Some proposals go further and propose that revenues be tied (or earmarked) for 
a specific purpose. Such tied revenues may build public support for a tax 
proposal and reassure skeptics that revenues will not eventually be spent on 
unanticipated and unwanted projects, like colonization of Mars or global 
military forces. 

A “common pool” approach to revenues, which many tax experts favor, separates 
taxes (as a source of revenue) from spending programs. At the national level 
this has many advantages and avoids tax-driven projects like the gasoline 
taxes in the United States that automatically build more highways. But at the 
global level, in the absence of a common pool budget and parliamentary 
institutions, the advantages of tied revenues may outweigh the disadvantages. 
Tax proposals should thus consider a package of spending projects that can 
inspire the public and guarantee financial support for positive policy goals. 

*partie=titre Policy Aspects
Multiple Purposes *partie=nil  
As we have seen, global taxes (like national taxes) may have three 
simultaneous purposes: (1) revenue-raising, (2) policy steering, and (3) 
income redistribution. Global tax proposals must consider the relations and 
tradeoffs between these purposes. Clearly, no tax can meet all three purposes 
equally well, but proponents must carefully develop projections, to discover 
the interplay of factors and the best policy and political results. 

The carbon tax best illustrates this issue. Conflict may arise between those 
who favor maximum revenue (for whom a low tax rate is optimal) and those who 
favor sharp reductions in carbon emissions (who favor high tax rates). Those 
concerned most with income redistribution may favor low rates and strong 
redistributive spending programs.
 
Advocates must understand very well the tradeoffs and likely distribution of 
benefits. With different constituencies favoring or opposing different aspects 
of the taxes, they offer an especially complex political landscape. The tax on 
currency transactions appears to satisfy all three criteria the best, which is 
why it attracts the broadest-based support. Currency transaction turnover is 
so large that the a tax might diminish trading by as much as 75% while still 
raising an enormous amount of revenue and creating substantial opportunities 
for global re-distribution.
 
*partie=titre Re-distribution *partie=nil 
The global economic system is highly unequal and very disadvantageous to poor 
countries and poor people. More than half the world’s population lives in 
serious poverty and income disparities have been steadily growing wider. In 
such a setting, global taxes would be inconscionable if they did not result in 
strongly progressive re-distribution. 

National tax systems in rich countries tend to re-distribute income and the 
European Union re-distributes from richer to poorer regions. But the 
international system, though it has a much steeper level of inequality, has 
presently no system of re-distribution other than Official Development 
Assistance, which amounts to only about 0.1% of global GDP. 

Fortunately, most proposed global taxes appear to be progressively 
re-distributive, especially when policy steering and revenue spending are 
considered. The taxes themselves levy commodities or services that mainly the 
richer inhabitants of the globe consume. This is especially true of the 
currency transaction tax. It is true for taxes on air fuels and taxes on air 
tickets. Taxes on carbon-based energy would also mainly impact the energy 
hungry consumers of the global North, with their automobiles, air conditioners 
and home appliances. Taxes of the airwaves would raise the cost of cell-phone 
users, while bit-taxes would raise the costs of email. All these items of 
consumption are rare among the world’s poorest billions. 

The most strongly redistributive global tax would probably be a tax on 
consumption, assuming that taxes on income or wealth would be too difficult to 
administer. This could be a global sales or VAT tax. It would recognize that 
consumption is a privilege that uses global resources, some small part of 
which should be returned to global purposes, including development and 
redistribution. A few advocates have proposed consumption taxes on luxury 
goods while others prefer general consumption taxes. Global consumption taxes 
might not find sufficient political support at present, but they are a 
promising idea that may find support in the future.
 
For progressive redistribution to succeed most completely, an international 
tax agreement must include firm obligations for contributions from participant 
tax authorities to a global fund. At first this may be only a modest 
percentage of the total revenue, but over time it must rise to half or more. 
Spending of this global fund must favor the poorest citizens. Funds should 
thus be targeted at poverty eradication, including health care, housing, 
provision of clean water and waste treatment, education for all, and similar 
programs. To make sure that the funds would not disappear into corruption and 
waste, oversight authorities at the national, regional and global levels must 
keep careful watch.
 
*partie=titre Revenue Neutrality? *partie=nil 
Some advocates of new taxes favor an approach that is “revenue neutral” – that 
is, the new levies should be adopted while at the same time diminishing other 
taxes, so that no new net revenues are raised. This position treats taxes as 
inherently unpopular and likely to weaken the vigor of private markets. Plans 
for environmental taxes in the European Union are proceeding on this basis, 
which proposes to make natural resources more costly and labor cheaper by 
shifting taxes between the two. 

Global taxes could theoretically be revenue neutral, by harmonizing national 
tax reductions that would offset the new globally-negotiated levies. 
Harmonization, in short, can work both ways. But national tax authorities will 
presumably not be willing to give up national revenue for global projects. For 
this reason, global taxes are unlikely to be revenue neutral. 
To succeed, global taxes must address new needs and fund global public 
purposes. This means that they will reduce private incomes, especially in rich 
countries, if only very slightly. The affected public must see a strong 
benefit, for which personal income will be traded for global public well 
being. 

*partie=titre Complementing Existing Fund Sources *partie=nil  
Like the proponents of revenue neutrality, some experts propose that global 
taxes should substitute for existing national funding for Official Development 
Assistance or for assessments and contributions to international organizations 
like the UN. This swap might leave resources for these purposes at the same 
level or even less than before. Such a scheme would offer savings for national 
budgets, but it would scarcely generate major new global resources. As such, 
it would be contrary to the spirit of the new tax idea. Funds generated by 
global taxes should be available to finance new programs, not substitute for 
monies that would be withdrawn back into national treasuries. 

Complementary funds would enable total global public resources to grow quite 
rapidly in an early phase of the tax regime. Eventually, of course, if the 
flow of global taxes reached a high level, the old system of contributions and 
assessments might be phased out over a period of years. But initially, the old 
and the new must exist side-by-side. 

Official Development Assistance (ODA) in 2000, according to OECD data, 
amounted to $53.7 billion, while in that same year, the UN Regular Budget was 
about $1.1 billion. The total UN system budget for 1997, the last year for 
which complete data is available, was $10.3 billion. The sums required to 
provide environmental protection, schooling for all, safe drinking water and 
other vital goals amount to further tens of billions of dollars per year. The 
potential revenue of some tax proposals, though quite substantial, is 
certainly not enough in an early phase to meet these many needs. We will need 
complementary national fund contributions if the full promise of the taxes is 
to be realized. 

*partie=titre Global Public Goods *partie=nil  
The concept of “global public goods,” which has recently attracted increasing 
attention,*{[111]} offers a theoretical support for global taxes. It provides a 
clear framework for understanding that markets do not and cannot provide many 
important things we need. Private markets may be efficient producers of 
toothpaste and washing machines. But markets cannot produce public goods like 
fire departments, lighthouses, public parks, and clean air. These public goods 
can only be produced and enjoyed collectively. 

Citizens with money to spend can buy market commodities, but they may prefer 
to have public goods, which are not on offer in the store. Public goods can 
only be created through a political process, assembling the needs and wishes 
of thousands, millions or even billions of people. Public goods emphasize 
public, democratic citizen action. The idea of global public goods shifts the 
concept to the global level, implying an even larger field of political 
action, collective thinking and solidarity. Global public goods would include 
a sustainable global environment, a far better global public health system, 
and better maintenance of world peace. In a sense, it is a transformational 
line of thought. To pay for these “goods,” citizens must agree to tax 
themselves and they must create responsive political institutions that will 
fulfill their collective aspiration. 

*partie=titre Living with Uncertainty in Tax Planning *partie=nil 
Global taxes attempt to change the world for the better. Advocates must 
approach such an ambitious project with a mixture of enthusiasm and humility, 
because there are very many unknowns. Even the most careful and responsible 
planning can have unintended consequences. Gunnar Myrdal, the Swedish Nobel 
laureate warned that “Taxation is a most flexible and effective but also a 
dangerous instrument of social reform. One has to know precisely what one is 
doing lest the results diverge greatly from one’s intentions.”*{[112]}
 
Inaction in the face of global problems may have greater and more serious 
consequences, such as global climate change. But a tax regime that will impact 
six billion people, across some two hundred nations, even if very carefully 
planned, is bound to have unanticipated and partially negative results. For 
this reason, it would be wise to begin global taxes at a low rate and to phase 
them in gradually. It also would be advisable to create feedback mechanisms 
that would swiftly introduce modifications and provide resources to help 
vulnerable people who may be harmed. Such a flexible plan will be stronger, 
more responsible and more likely to inspire public confidence. 

*partie=titre Strategic Issues
Starting Small? *partie=nil 
Taxes producing large revenue are likely to stir up major opposition from 
those who will lose income, such as financial institutions opposing CTTs or 
oil companies opposing carbon taxes. These institutions are extremely 
influential and they have a clear vision of how their interests would be 
damaged. Global tax schemes that take aim at such huge concentrations of power 
must be prepared for difficult political struggles and a high possibility of 
failure. 

By contrast, a first global tax might be a small measure that sets important 
precedents while evoking few powerful opponents because it produces only small 
amounts of revenue and has only very modest policy steering and 
re-distributional effects. CTTs and carbon taxes set at a very low level might 
meet this requirement. International excise taxes would be an interesting, 
low-target alternative – for example, a tax on tobacco products. A global 
tobacco tax would complement the anti-tobacco campaign of the World Health 
Organization, advocates could promote it as a health tax and it would add a 
small additional increment to nearly-universal national taxes already imposed 
on these products.
 
The first global tax established was the tax on seabed mining in the form of 
royalties payable to the International “Seabed Authority. Doubtless it was 
adopted as part of the Law of the Sea because at the time there was no seabed 
mining to tax! Nor has there been any since, resulting in zero revenue. With 
this in mind, global tax advocates might consider a next step that aims above 
zero, but not in the stratosphere. When nations and citizens find they are 
comfortable with this tax, steps towards more ambitious or high-revenue taxes 
may find a smoother course to adoption. 

On the other hand, broad public campaigns depend for their success on large 
visions and bold approaches. The two most prominent proposals are clearly not 
modest ones, and still they appear to have the best chance for success. So 
starting big may be better than starting small. But even the big proposals may 
succeed best if they begin with a small rate and phase in over several years, 
beginning modestly (though boldly) the great transition. 

A planned phase-in, beginning with a low rate, can help to avoid errors and 
ease trans-itions. This is particularly important with the carbon tax, which 
will cause large shifts in energy investments, research programs, 
transportation systems and the built environ-ment – shifts that can only occur 
over many years. A phase-in with increments known far in advance can avoid 
backlash, promote effective forward planning and smooth the whole transition 
process. 

*partie=titre An Adjustment Fund *partie=nil  
Though global taxes will have many very positive results, they may also have 
negative effects for certain groups of people, some of whom may be poor and 
vulnerable. For this reason, advocates should propose an adjustment fund to 
help out those most vulnerable and least able to adapt. 

Let us imagine the case of a small farmer who uses a simple tractor, powered 
by a gasoline or diesel engine. A carbon tax might increase costs so much that 
the farmer’s crop sales could no longer cover expenses, forcing the family 
into poverty. An adjustment fund might offer loans for new and more 
fuel-efficient tractors, sustainable energy motors and other farm purposes 
such as solar-panels for heating the barn. An adjustment fund might also help 
poor people insulate their homes and develop alternative cooking devices 
powered by solar energy. 

The adjustment fund would combine money with expertise to help millions of 
people (and governments, too) cope with the changing energy markets and their 
impact on human life. An adjustment fund would also serve as a gesture of good 
faith towards the hundreds of millions (or even billions) of poor people for 
whom even small change carries very serious economic risk.
 
*partie=titre Assembling Political Blocs and Advocacy Campaigns *partie=nil  
As global taxes come closer to political reality, advocates must begin to 
think about assembling political blocs or coalitions to press forward towards 
enactment. We already can see the outlines of such coalitions.
 
In the case of the carbon tax, the coalition includes environmental groups, 
small island states and other coastal nations threatened by rising ocean 
levels, advocates of the UN and global institutions, intellectuals, 
sustainable energy industries, and insurance companies. This forms already a 
very substantial alliance. The CTT has managed to attract broad publics with a 
concern about globalization and the ills of the global financial system. The 
CTT also appeals to trade unions, countries negatively affected by currency 
speculation, economists, UN advocates, and others. 

Tied revenues provide a means to enlarge coalitions by offering benefits to 
targeted constituencies. Suppose that a carbon tax revenue would be earmarked 
for sustainable development purposes, including clean water and energy access 
for all. Beneficiaries might be very numerous and they might provide key 
elements of a broadening support bloc to press for the tax adoption. 
The time has come to build unstoppable worldwide campaigns, because 
coordinated international public pressure yields results. In the case of the 
CTT, a campaign is already under way. Many national and regional NGO groups 
have coordinated their efforts globally since March 1999 and the positive 
results are clearly visible. The carbon tax now needs a campaign of its own. 
Both must strategize very broadly. Coalition building implies careful thought 
about logical allies on a world scale. The campaign for an International 
Criminal Court provides interesting precedents of wide NGO coalitions and 
nation-specific campaigns. 

As the process moves forward, we will see the earliest steps in a new global 
political process. Global citizenship will at last take form, not as a dream 
or ideal, but as a real process involving common political tasks across 
national borders, to create a common future.

*{6. Conclusion}
In a globalizing world, the United Nations and other international agencies 
must find substantial new funding to address emerging crises and promote 
global public purposes. Taxes can raise tens or even hundreds of billions of 
dollars annually for projects to protect the environment, measures for public 
health, programs to overcome poverty, and initiatives to prevent wars and 
civil conflicts.

Global taxes can have powerful policy steering effects. A carbon tax can 
reduce carbon dioxide emissions, slowing the dangerous effects of global 
warming. A currency transaction tax can throw “sand in the gears” of the 
currency trading system, reducing volatility and speculation that can harm 
millions of people. Other taxes can diminish pollution of the oceans or reduce 
the arms trade. 
Global taxes can also help overcome the world’s growing inequality by 
systematically redistributing revenue, helping the world’s poorest people 
escape from poverty. Such redistribution would follow the pattern of income 
redistribution that national tax systems introduced nearly a century ago. 
A tax amounting to just 1% of global GDP could address many of the most 
serious international problems and create a much more healthy, humane world 
for succeeding generations, while placing only a modest burden on consumers in 
rich countries. 

As recently as the mid-1990’s, global taxes seemed a distant hope – bedeviled 
by technical concerns, opposed by powerful interests and blocked by an 
intractable United States government. But today the political balance has 
shifted. NGOs have built a worldwide mass movement and put global taxes on the 
political agenda. Politicians and governments in Europe and in major countries 
of the global South such as Brazil and India now back a currency transaction 
tax. Implementation seems a lively possibility. 

Much remains to be solved, though, before governments agree to an effective 
international tax program. Advocates must consider how best to phase in the 
taxes, how to assure broad re-distribution, how to promote democratic 
accountability and oversight of the funds, and how to balance the demands of 
state sovereignty and global action. Difficult as these challenges may seem, 
they can and will be overcome. 

Though the global tax movement has made great gains, its future is still not 
assured. We need bold leadership and imaginative strategy to bring global 
taxes – and the better world they promise – finally to reality.