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The First Step: Report from the Paris Conference

Real Progress on Airline Ticket Tax

The Paris conference from 28 February to 1 March 2006 changed the dynamics of the process towards Innovative Instruments for Financing Development. Even though we can’t call it a breakthrough yet – the commitment of the other big industrialised nations is still too small – there is real progress, reports Peter Wahl.


Conference logo

President Jacques Chirac managed to convince some more countries – in Europe Norway, Luxembourg and Cyprus – to support his top issue, the airline ticket tax, that means 13 countries (see table) have now proclaimed their intention to introduce such a tax or have already done so.

Airline Ticket Tax: Participating countries

Country  State of affairs 
Brazil  announced 
Chile  in process  
Congo  announced 
Ivory Coast  announced 
France  to be implemented 1 July 2006 
Jordan  announced 
Luxembourg  announced 
Madagascar  announced 
Mauritius  announced 
Nicaragua  announced 
Norway  announced 
United Kingdom  special deal with France, see article  
Cyprus  announced 
Source: compiled by the author   

With the ”Pilot-group for Solidarity Contributions for Development“ including 38 nations (a.o. Great Britain, Spain, South Africa, Germany, Austria, Belgium, South Korea, India, Mexico) an institutional framework was created which will be responsible for the follow-up. The group is open for NGO participation.

The next important step on international level will be a conference initiated by the Brazilian government and Brazilian NGOs that probably will take place in Brasília next June.

* IFF deal with Great Britain
One day before the conference started France concluded a politically quite important deal with the UK regarding the International Finance Facility (IFF), a concept which the Blair government has been vehemently promoting for several years. This agreement paved the way for the participation of the British chancellor of the exchequer, Gordon Brown, in the conference. The core of the deal is as follows:
a) Britain diverts an unspecified amount for an unspecified time period (“a long-term stream of finance“) from their already existing air ticket tax to the IDPF (>>> International Drug Purchase Facility), proposed by France,
b) France pledges to spend approximately 100 Mio. US-$ per year over 20 years for the British IFF project.

Due to weak international support, the IFF has shrunk significantly. The British government currently expects to collect about 500 million GBP for education and health every year. This is less than 10% of the initially envisaged amount.
The French-British deal is not yet the end of the competition between IFF and ticket tax. However, it seems that the ticket tax is now in a better position than the IFF, which in essence is nothing else than the old concept of development financed through the capital market and guaranteed by governments, as the World Bank has been practicing ever since. Above all, the quick implementation of the ticket tax neutralises the only advantage the IFF had compared to other concepts: the immediate flow of money (“front loading”).

In view of the straight neoliberal politics of the Blair government, which often enough demonstrated that it considers itself the representative of US-interests in Europe, this is a diplomatic success of France that should not be underestimated.

* Problems of the IDPF
IDPF shows that with international taxes about to become a reality the critical issue is the use of funds. But the devil is in the details. Brazil, for instance, indicated that it will not forward all revenues from an air ticket tax to the IDPF but rather spend a part of the money on national purposes. In view of the fact that Brazil has its own pharmaceutical industry which produces generics against HIV/AIDS, the strategy makes sense: the tax revenue could help to fight the disease. But even more - it could strengthen the competitiveness of infant pharmaceutical industries in developing countries. Indeed, from a developmental point of view, the idea not to channel additional money to the pharmaceutical TNCs is attractive.

This process, however, could lead to conflicts with the WTO. It seems to be a matter of time until the first complaints about “distortion of competition” by the TNCs (resp. their governments) are submitted to the Dispute Settlement Body.

The second big issue concerning the IDPF is governance. Since there are already several structures for vaccination and similar programmes in place, in which big international organisations such as the WHO, UNICEF and the World Bank participate, efficiency of aid and the prevention of bureaucracy is of utmost importance. Organisations working on HIV/AIDS pointed out, that considering previous experiences, the tax revenues should in no case fall into the hands of the World Bank.

* Positive side effects
The new dynamics have some positive side effects:
+ there is a remarkable shift in the discourse on globalisation towards a more critical view of the process;
+ more advanced concepts such as the Currency Transaction Tax (CTT) and action against tax evasion remain on the agenda (>>> Tobin Tax: “Ready for Implementation”);
+ the French attempt to demonstrate leadership and to build a ”coalition of the willing” has turned out to be successful. This approach is better than the inflexibilty of global multilateralism.

The opening speech of Chirac (>>> Solidarity and Globalisation) illustrated this shift: ”At the rate things are going today, globalisation, far from bridging this gap, is widening it even further. (...) Following years of adhering to the widespread illusion that globalising the economy would be enough to solve all development problems, the international community is finally accepting the need for solidarity.”

Among G 7 governments this is the most advanced position on the issue. Kofi Annan and other speakers from the South have picked up this line of argument.

With the working group on the taxation of financial transaction and on tax evasion the French government made clear that - apart from the airline ticket tax – it wants to push ahead with more ambitious projects. Therefore, the CTT and tax evasion are mentioned in the official summary of the conference. Unfortunately – given the present balance of power – it seems unavoidable that we have to live with more or less problematic projects such as lotteries and private public partnership.

Furthermore, it became obvious that the EU Commission, the ministers of finance, the IMF and the US are the ones that continue to block the road. Again and again they tried to justify their position with arguments from five years ago. They seem not to realise that new studies and reports have carried the debate forward (see reference).

* The role of Germany
Compared to other industrialised countries, Germany was represented at a rather high level by the minister for economic co-operation and development, Heidemarie Wieczorek-Zeul. This is even more remarkable in view of the fact that the new government – unlike the former coalition – doesn’t support the airline ticket tax. Minister of finance Steinbrück unambiguously maintained this position in an interview some days before the conference. After the conference the minister of economics, Glos, also rejected the tax.

Despite such resistance, Wieczorek-Zeul voiced her support for international taxation – which is as far as she could possibly go without cabinet backing. She promised to take up the challenge and to fight. It can be expected that she will try to use some of the impetus provided by the conference to change the government position. Germany joining the Chirac initiative would be an important signal which could further propel the process.

* The role of civil society
Civil society was quite well represented and visible at the conference. For instance there were several NGO speakers in the plenary and in the working groups.

Two sectors were particularly active: the development/global justice community and single-issue (HIV/AIDS, Health) NGOs. For most of them it was a new constellation but the co-operation turned out to be productive.

Nevertheless, civil society participation showed some organisational deficits, above all the lack of understanding of the strategic and long-term potential of the process. Moreover, the environmental community was almost completely absent. The Paris conference, however, provided civil society participation with new impulses which need to be channelled into action.

Peter Wahl works with WEED (World Economy, Ecology & Development) and is a member of the co-ordinating committee of attac Germany.

* Official French conference web-site >>> here.
* Bruno Jetin/Lieven Denys, Ready for Implementation. Technical and Legal Aspects of a Currency Transaction Tax and Its Implementation in the EU, WEED: Berlin 2006 >>> PDF download here.

Posted: 3 March 2006.

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Brazil Joins Donors: US$ 20 million for IFFIm / Paris Conference on Airline Ticket Tax


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