Initiatives that break taboos: Innovative ideas broach the idea of global taxes
by John W. Foster

When Presidents Lula of Brazil and Chirac of France announced Action Against Hunger and Poverty at a meeting at the UN in 2004, the thought that it might take concrete shape within two years in a linking of innovative instruments to provide additional development funding and specific priority health needs (HIV/AIDS, TB and malaria) seemed a dream indeed. Hostility to the idea of new, possibly global, levies like the Currency Transaction Tax (CTT) was palpable, particularly in Washington. The idea of a tax on air travel or a carbon tax seemed equally unrealistic.

On July 1, France will implement its air ticket levy and more than a dozen other countries have pledged similar measures. An international Leading Group on Solidarity Levies to Fund Development has more than
40 government members and is moving toward establishing a trust fund – UNITAID – for levy proceeds and establishing an International Drug Purchase Facility (IDPF).

The Levy

In Paris, March 1-2, 2006, President Chirac convened a large international ministerial conference to mark progress on this agenda and build momentum. The Ministerial Conference on Innovative Financing for Development was attended by approximately 600 people, including representatives of 93 states, 3 heads of state, more than 70 ministers, the UN Secretary-General and representatives of many multilateral organizations and NGOs. The involvement of a significant number of AIDS-related, development and finance-reform NGOs was demonstrated in both speakers and participants.

The French government detailed its intention to begin a levy graduated according to class and destination on air tickets. Together with Gordon Brown of the UK, it confirmed that the UK would contribute to the trust fund created by the air ticket levy, and that France would contribute to the UK’s innovative International Financing Facility for Immunization (IFFIm). The French-initiated fund would be aimed at issues of consistent and sustainable supplies of life-saving drugs for people with HIV/AIDS and other diseases.

The International Drug Purchase Facility (IDPF)

In a joint declaration (June 2, 2006), Brazil, Chile, France and Norway established the foundations of the IPDF. Noting that at least six million people with HIV need anti-retroviral treatment (currently available to only 1.2 million), the sponsors stated “it is imperative to change the scale at which treatment is available which, in turn, implies a change in scale in the mobilization of resources.”

The IDPF aims to assist in the consistent provision of essential drugs for HIV/AIDS, TB and malaria in poorer nations. It claims the principles of solidarity, complementarity, sustainability, predictability, additionality, adaptability, partnership, independence, accountability and aid effectiveness – no small order.

It seeks to use new innovative additional funds to provide predictable and sustainable sources of financing to pool drug purchases, provide a new impetus for drug prequalification processes and to support strengthened national regulatory agencies for drug quality control. It hopes to promote the diversification of generic products, induce price reductions and attract new manufacturers.

Current thinking is that organizationally, the IDPF will be a “small body legally embedded in an existing organization.” The fac-ility will be governed by a combination of an IDPF-UNITAID Board with responsibility for oversight over the trust fund and a secretariat, and will involve “donors and other stakeholders.” A consultative forum would include interested stakeholders meeting at least annually, and “would allow for reporting and broad accountability” as well as dialogue on overall strategy.

The sponsors have already involved interested NGOs and people living with the diseases and welcomed participation of pharmaceutical companies, major multilateral organizations in the field (like WHO, the Global Fund, UNAIDS, UNICEF, the World Bank and UNDP) and constructive contributions by both the Gates and Clinton Foundations.

The number of countries agreeing to launch a “Solidarity Levy” on air tickets continues to expand. South Korea has joined the group of 15 countries intending to launch the levy this year; India, Guatemala and China are among others rumored to be considering it.

The IDPF continues to develop as well. While the French levy is expected to contribute approximately $250 million annually initially, Spain has agreed to fund $100 million a year for the first four years with no levy, Norway $25 million, Brazil $12 million and Chile $4 million. France indicates that 90 per cent of its levy resources will go to the IDPF and 10 per cent to IFFIm. The IDPF sponsors indicate that budgetary as well as levy transfers are both welcome.

On June 2, as part of the lead-up to the Football World Cup in Germany, FIFA, through 1995 Player of the Year George Weah, underlined the sports organization’s commitment to human rights by announcing that two UNITAID-branded official match balls will be exchanged by the two team captains before the kick-off of each of the 64 matches.

Civil society organizations concerned with the financing side of this activity have met not only in Paris in February but at the May 27th Tokyo Seminar on New Financing Mechanisms for Development. Those working on HIV/AIDS have taken part in the technical meetings on the IDPF in Geneva (April) and New York (June).

The pace continues

Brazil chairs and is hosting a Ministerial Conference of the Leading Group in Brasilia July 6–7.  The event will focus one day on the air-ticket levies and the IDPF, and a second day with roundtables on other innovative mechanisms.

The Leading Group will sponsor an event during the UN General Assembly in September.

Norway, which takes over the Chair September 1 plans a further Ministerial Conference later in the year. Two technical working groups have been set up to further the implementation of the levies (Paris, June 29) and the IDPF.

It’s not just about air tickets

The innovative financing initiative is about a menu of practical projects, from chef Gordon Brown’s IFFIm, chef Chirac’s air-ticket levy, through the Chilean interest in a new round of Special Drawing Rights at the Internationl Monetary Fund, and the German Development Minister’s continuing interest in a Currency Transaction Tax (CTT), among others. NGOs are vitally interested in several of these initiatives and are raising other themes including a carbon tax, debt cancellation, and an international tax agreement and ‘tax justice.’

The absence of Canada from the growing number of countries involved in the development of initiatives on innovative financing is, to put it bluntly, embarrassing. Canada was one of the first countries to “toy” with the Tobin Tax and, at a crucial moment when U.S.-sponsored gag initiatives threatened to end all consideration of such initiatives, kept alive a small flame of research mandated at the Geneva 2000 UN World Summit on Sustainable Development review conference. Norway, a northern nation with which we have often found ‘like-minded’ common purpose, is playing a leadership role. It’s time our foreign, finance and development ministers endorsed Canada’s participation in the Leading Group and leadership in one or more innovative development financing engagements.

Looking forward, what is of interest overall? As President Chirac noted in Paris in March, these initiatives break through a taboo (forcefully pressed by the U.S.) which for several years had prevented negotiation and action about international levies like the CTT. The initiative on the air-ticket levy broke through one of the main conceptual limitations on international levies, that is, that they must be universally supported to be initiated. The principle of an international tax, nationally administered, moved past the barrier.  

John W. Foster, Principal Researcher at the North-South Institute in Ottawa, attended the Paris Conference on Innovative Financing March 1.