Debate on international taxes FES Briefing Paper June 2006 Page 6 George Soros, Jacques Chirac, and Austrian Prime Minister Schüssel. At the Davos World Economic Forum 2005 former German chancellor Schröder likewise came out in favor of the tax. As early as 2002 the German Ministry for Economic Cooperation and Development (BMZ) commissioned a study that came to the conclusion that a two-tier variant of the Tobin tax would not only be feasible but also desirable in terms of development policy(Spahn 2002). The most recent success of the advocates of a CTT is a resolution adopted by the Austrian parliament on April 27, 2006, calling on the government to examine,“in the framework of the European institutions, the feasibility of an EU-wide tax- e.g. a currency transaction tax, a tax in the area of air transportation, shipping, natural resources, etc.- and at the same time to work for uniform steps toward the implementation of such a tax- without placing the Lisbon goals in jeopardy.” Even though other taxes have also found their way on to the agenda, it would be absolutely essential not to abandon the CTT or to play off one tax or tax type against others. The thrust of the CTT is aimed at the core of a globalization dominated by the financial markets. Without political control of the financial markets, alternatives to the dominant neoliberal paradigm are doomed to precariousness. Certainly, the CTT is not the only instrument suited to regulating the international financial markets; but implementing the CTT would create a precedent. This- and not the tax’s alleged weaknesses- is also the reason why the CTT has run up against such vehement resistance. Indeed, what institutions ranging from the Deutsche Bank to the European Central Bank have put forward in the garb of expert arguments has as a rule not been addressed adequately even in the literature of the proponents(ECB 2004; for a critical assessment, see Wahl 2005a). Environmental taxes If we take a close look at environmental taxes, we cannot help but find that the logic of international taxation is quite cogent: • Many environmental problems are international or global by nature and can therefore not be addressed only in the national framework. And for this reason international financing mechanism also appear called for. • Viewed in economic terms, environmental damage is a negative externality. That is, such damage causes costs that are not covered by those responsible for them. A tax or levy would serve to internalize these costs by requiring those responsible to pay at least part of these costs. • Many environmental goods are what is referred to as global public goods, or global commons. And they should therefore be financed publicly, i.e. through taxes. The air-ticket tax The French air-ticket tax levies a rate of one euro on every ticket sold for economy-class domestic and European flights. The rate for business and first class is ten euros. The respective rates for intercontinental flights are four and forty euros per ticket. The rationale for the higher rates on business and first-class tickets is not distributional policy. With 60% of the revenues of air carriers stemming from these classes, the tax revenues collected are accordingly high. On the whole, the French government anticipates revenues from the tax amounting to up to€ 200 million. However, viewed in environmental terms, tax rates as low as these generate virtually no regulatory effects. Even those used to flying at discount rates will have no trouble paying an additional one or four euros for a flight, and the rates for business- and first-class tickets are certain not to induce passengers to switch other means of transportation, or not to travel at all. Any attempt to drastically increase the tax rate with the aim of reducing the volume of air transportation would be bound to run up against virtually insurmountable political problems. At least in the industrialized countries, the ticket tax is a mass tax. The air-ticket tax is unsuited as a means of regulating globalization, at least viewed in terms of the criteria outlined above. An air-ticket tax is acceptable only in view of its function as a first international tax, as a means of gaining a toehold for the new paradigm. In deciding what use these tax revenues should be put to, France has opted in favor of a dedicated fund, the so-called International Drug Purchase Facility(IDPF). And here we may bear witness, once again, to the truth of the adage: The devil is in the details. Brazil e.g. has already indicated that it intends to pay only part of its revenues from the tax into the IDPF, reserving a certain share for national expenditures. Bearing in mind that Brazil now has a pharmaceutical industry of its own that produces, among other drugs, generics for use against Aids, we cannot help but conclude that one of the government’s aims here is to foster the national pharmaceutical industry. Viewed in terms of development, though, it certainly also makes sense not to squander funds earmarked for action against epidemics on drugs manufactured by the pharmaceutical TNCs in the North. In this