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G20 finance ministers meeting in London this weekend should provide a $280 billion bailout for millions of poor people struggling to survive the economic crisis, Oxfam said today.
A currency transaction tax is one of three measures that could raise much needed funds for developing countries without putting any extra burden on ordinary taxpayers. The proposals are set out in a new Oxfam briefing paper, Money for Nothing: Three ways the G20 could deliver up to $280 billion for poor countries.
Reforming tax havens alone could release $160bn, reallocating an already agreed IMF bailout could free up another $89bn, and introducing a currency transaction tax could raise at least a further $30bn – each a significant sum to help poor people suffering in the crisis.
The money is desperately needed to prevent the crisis derailing efforts to reduce poverty as developing countries suffer job losses because of falling trade and capital flows. According World Bank and UN estimates, between 50-100 million more people will be trapped in poverty this year, forced to survive on less than $1.25 per day.
Max Lawson, Oxfam senior policy adviser, said: “The beauty of these proposals is that they allow the G20 to bailout poor people without asking ordinary taxpayers at home to put their hands in their pockets. Rich countries that spent $18 trillion bailing out banks should not be allowed to plead tight budgets as an excuse for failing to help poor people – especially when there are alternative sources of funding available that would cost them little or nothing.
“A currency transaction tax for development would force fat cat bankers to help clean up the mess caused by their greed instead of returning to bonuses as usual.
“The G20 is already clamping down on tax havens but it must ensure the benefits are not restricted to countries that have the power to call these states to account.
“G20 finance ministers should ensure that it is the poorest people in the world that benefit most from the IMF’s distribution of special drawing rights.
“G20 Finance Ministers have a real opportunity to ensure that poor countries receive proper protection from a crisis they did nothing to cause. Millions more families are being forced to make impossible choices between buying life saving medicines, sending their girls to school or buying food for their next meal,” Lawson said.
The G20 in April promised to provide $240bn to help developing countries deal with the financial crisis – including $50bn for the poorest. But the World Bank estimates that developing countries will need up to $635bn in 2009 just to stand still.
Much more is needed to reduce poverty, increase the number of children who attend school and tackle health problems such as HIV/AIDS and malaria.
How the three proposals would work:
Implement a Currency Transaction Tax (CTT) of at least 0.005% on international currency transactions. It is estimated that such a tax could generate a minimum of $30 billion per year if applied to the four major international reserve currencies (US Dollar, Yen, Euro and British Pound). If more currencies were included, this figure could increase as high as $50bn. A slightly higher rate could also provide more resources for government spending in rich countries facing cuts in services.
Transfer half of rich countries’ new Special Drawing Rights allocations. Agree that at a minimum all the G8 and other major donor countries will transfer half of their allotted new allocations of IMF Special Drawing Rights (SDRs) to Low Income Countries. SDRs are a form of IMF quasi currency distributed to member countries. The April G20 agreed to create $285 billion worth of SDRs, and rich nations will receive $177 billion of this amount. Oxfam is calling for half of this, $89 billion, to be transferred to the poorest countries.
Deal with tax havens. Put in place a multilateral agreement for the automatic exchange of full tax information and require country-by-country reporting of subsidiaries, sales and profits by multinational corporations, to help developing countries recoup lost tax revenue. This could result in a further US$160 billion for poor countries, and at the same time would enable rich countries to recover their lost tax revenues. The current OECD initiative on tax havens, supported by the G20, relies on bilateral agreements between countries. To date no developing country has signed a bilateral agreement with a tax haven.