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Paying for globalization: Tax proposals for the world economy

By Carl Teichrib
web posted June 25, 2001

Unknown to the majority of Americans, detailed proposals have been circulating within the international community for an upcoming global tax. Unlike current state or federal taxes - which are to be used for national or local infrastructure - the money derived from this levy will go directly into the coffers of the United Nations. Already one G7 nation has officially endorsed such taxation, and others are now considering it.

Proponents of the United Nations have long argued that the accepted system of UN funding via national contributions has been, for the most part, unsatisfactory. Increasingly, these advocates have been calling for independent funding, stressing the need for monetary alternatives that would give the UN a financial shot-in-the-arm.

Towards this end, the United Nations Economic and Social Council has been looking at a variety of fundraising ideas, including the creation of a world lottery, a UN credit card program, fines for breaking international laws, and a UN Security Insurance Agency. This last proposal is especially unique; smaller countries that lack significant military forces would pay insurance premiums to the United Nations. In response, the UN would guarantee the insured nation's security by employing "international forces" against any military threats to that country.

Internationally based surcharges have also been proposed. The UN sponsored Commission on Global Governance advanced a variety of user fee arrangements in their 1995 report Our Global Neighborhood. According to the report, surcharges could be levied on transnational airline tickets, ocean-going maritime traffic, and on non-coastal ocean fishing activities.

James Tobin

But of all the plans and proposals, one has stood above all others - the "Tobin Tax." The brainchild of US economist James Tobin, this tax calls for a universally accepted levy on foreign currency transactions. Considering the trillions of dollars traded each year, the fundraising potential is staggering. And, as a selling point to national governments, it's being trumped as a way of clipping the wings of "rogue" currency traders. In fact, the Tobin Tax has been so well received among various global policy makers that in 1999 the Canadian federal government officially wrote it into their legislation - agreeing to pursue and embrace such taxation when the world community finally adopts it.

Introducing the concept to the Canadian House of Commons on October 28, 1998, Member of Parliament Lorne Nystrom, described the currency charge as "a feasible part of a new world order." Elaborating on the fund-raising potential and its possible uses, Nystrom explained, "If there were a 0.1% Tobin tax on foreign currency transactions, that would raise, in 1995 dollars, $176 billion US. A Tobin tax of 0.003% would be enough money to fund United Nations peacekeeping around the world...There would be a strengthening of international organizations. The United Nations would become a meaningful world government...There could be permanent international peacekeeping forces."

Canadian political support for the proposal was broad-based. The Tobin Tax vote, held on March 23, 1999, passed 164 to 83. According to the MP, and others in favor of the tax, the International Monetary Fund or the World Bank could be empowered to implement it.

Considering that Canada is Americas largest trading partner, with commerce trade running in excess of $362 billion in 1999 alone, the Tobin Tax decision takes on special significance. And now France, among other European nations - and the European parliament itself - is contemplating this tax. Brazil has also been discussing it. Moreover, the tax received considerable attention during last year's United Nations Millennium Forum and Summit. Unquestionably, international momentum is building.

Within the US the Tobin Tax has been slow to catch on, but it is starting to make political headway. Last year, Congressmen Peter DeFazio (D-OR) and Senator Paul Wellstone (D-MN) urged the US government to enact the global levy. Certain US special interest groups have also joined the cause. The California-based Center for Environmental Economic Development has established the "Tobin Tax Initiative." And the World Federalist Association, a national "global governance" lobby group led by former Congressman John B. Anderson, is also hard at work to sway US lawmakers to accept the tax.

While pressure is mounting to enact world taxation, major implementation problems exist. The tax would have to be universally accepted; otherwise non-participating nations would quickly become tax havens. With this in mind, what enforcement options would be used for non-compliant countries? Who would ultimately collect the tax and oversee its use? How would a global tax affect national and regional economies? And what safeguards would be employed to restrain corruption or to keep the levy from continually rising?

Initially, problems surrounding design and management of the tax may seem insoluble. However, the fact remains that we now have a harmonized global customs and tariffs arrangement, which at one time was considered as utopian as the presently discussed international tax program. Key organizations and individuals within the world community are not asking "if" or "when," but rather "what will it take?"

Beyond the observable complications associated with implementing a UN empowering world tax, a greater danger exists in what such taxation represents. Norman J. Padelford, an early advocate of United Nations monetary reform, gave this warning in 1963 regarding autonomous UN funding, "The power of an independent purse could become the prelude to the seizing and exercising of independent power. This could be detrimental to national independence and even ultimately to personal freedom." (emphasis mine)

Padelford's warning cannot be overemphasized. In many ways, national sovereignty is already being eroded by the "globalization process." And as the nation transforms itself to the will of the international community, personal freedoms will be challenged. At the very least, a world taxation program would place new constraints on business, trade, and industry - and, undoubtedly, final costs would be handed down to the consumer.

One thing we can be certain of; to the average citizen, an international taxation bureaucracy would be unaccountable, unapproachable, and uncontrollable.

Carl Teichrib has been published in the Christian Citizen, Discerning the Times Digest, Eco-logic, Despatch (Aust.), and other publications across the US and Canada. He is the Director of Research at Hope For The World, the organization of best-selling author Gary Kah. Carl can be reached at cteichrib@email.com.

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