This morning Oxfam launched their “Robin Hood” (financial transactions) tax campaign in Canada with a press conference in Ottawa and the launch of their website.
Together with Oxfam officials, I spoke in favour of the tax from an economics perspective and Dale Marshall from the David Suzuki Foundation talked about how revenue raised from it should be used to help fund climate change programs.
Estimates are that an international financial transactions tax at a rate of 0.05% could raise up to $600 billion a year and the Robin Hood tax campaign proposes that a quarter of this goes to fund Millenium Development goals and another quarter goes to support for international climate change programs.
This campaign is leading up to the G20 meetings in Toronto this June and is part of an international campaign for an international financial transactions tax. There are some really good videos and more background information on the UK website. The Centre for Economic Policy and Research in the US also has some good material on their site.
The issue may not have received much attention in Canada, but it is a much bigger issue in other countries. On Sunday, British PM Gordon Brown just re-iterated his call for a global financial levy. Sarkozy and Merkel and Nancy Pelosi have recently both called for an international transactions tax, as did Larry Summers a number of years ago.
Hundreds of economists have signed a letter calling on G20 leaders to introduce a financial transactions tax and it has also been supported by Paul Krugman, Jospeh Stiglitz, Simon Johnson and other notable economists.
The IMF has prepared a report on options for a tax on banks or a bank levy that will go to G20 Finance Ministers at their meeting this Friday in Washington. The first focus is on some sort of bank levy insurance scheme for failing banks and to pay for some of the costs of the crisis, but they have also been studying the issue of a financial transactions tax and that will presumably come up for discussion in June. I don’t think many expect endorsement of a FTT from the IMF, but some sort of levy on banks would be a first step.
Unfortunately, the most outspoken opponent of any sort of tax or levy on banks is Canada’s Finance Minister Jim Flaherty who flatly refused to support it back in February. Last week he sent a letter to G20 Finance Ministers calling instead for a market based solution requiring banks to have ”contingent capital” for their subordinated debt (debt that turns into equity given some trigger). This is clearly a diversionary tactic. Many commentators in the Financial Times quite rightly have said that contingent capital schemes would probably lead to greater instability and not less.
More pressure needs to be put on Flaherty to stop obstructing progress in this area. Some opposition parties in Ottawa seem to be warming up to this. The Halifax Initiative has an open letter from economists for people to sign on.