• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Development: Tax on Commercial Flights to Raise Money for Aid

Posted on: Tuesday, 7 March 2006, 00:00 CST

By Julio Godoy

PARIS, Mar. 3, 2006 (IPS/GIN) -- The decision by 13 countries to introduce a levy on commercial flight tickets has been hailed as a first step toward an international policy for financing international development.

The countries that have agreed on the tax are Brazil, Britain, Chile, Congo Brazzaville, the Ivory Coast, Cyprus, France, Jordan, Luxembourg, Madagascar, Mauritius, Nicaragua and Norway.

In some of these countries such as Britain, Chile, and Brazil, some form of tax on air travel is already in operation. Others have announced they will start raising it this year. In France it will come into force July 1.

Britain raises $1.8 billion dollars a year through taxation on commercial flights.

Britain has so far channeled this revenue into its budget. From now on it will allocate a percentage of this revenue for international health programs.

The tax rate varies. France will impose a fee ranging from one to 40 euros per ticket depending on the destination. It expects to collect about 170 million euro ($200 million) a year through this tax. Brazil will add a two-dollar tax on about 6 million international air tickets a year.

The decision on the air travel tax was announced at the Innovative Financing for Development conference organized by the French government Feb. 28 and Mar. 1.

"This is the first step towards an international fiscal policy focused on financing development," Brazilian minister for foreign affairs Celso Amorim told IPS. "We are already discussing new taxes on other international transactions such as the trade in weapons, and speculative financial operations."

U.N. Secretary-General Kofi Annan, who attended the event, said the Paris conference had allowed the international community to "discuss concrete measures" to provide international cooperation and development programs, especially those aimed at meeting the eight Millennium Development Goals (MDGs).

The MDGs were adopted by the United Nations General Assembly in September 2000. Among the eight goals are the eradication of extreme poverty and hunger, reduction of children mortality, and combating HIV, tuberculosis and malaria.

Annan praised the idea of raising an international air ticket solidarity tax for financing the MDGs. "Such initiatives have many virtues: they are practical, they are targeted at those who can afford it, they can be implemented rapidly, and they are flexible so that, over time, more countries can join," he said.

"Financing for development is ... an area where political courage is needed," Annan said. "We must not rule out ideas solely for fear of controversy."

The French government, which launched the proposal of a special tax on commercial flights, says that application of the tax in the 13 countries could bring in about $400 million a year. The European Commission, the European Union executive, has estimated that if adopted worldwide, especially throughout the industrialized world, the tax could raise up to $10 billion a year.

Some countries including Germany, Belgium, India and China have said they will consider introducing such a tax. Others such as the United States and Australia have ignored it.

"The idea of innovative financing for development is now an issue on the agenda of all major international forums, and its principle has gained broad support on the part of the international community," Susan George, chair of the planning board of the Transnational Institute in Amsterdam and one of the main advocates of small taxes on international speculative transactions, told IPS.

According to estimates presented at the 2002 conference in Monterrey in Mexico on financing for development, overseas development aid would have to be doubled from the present $60 billion a year if the MDGs are to be met by 2015.

Representatives from more than 90 countries and several non- governmental organizations agreed to create a group to consider new proposals for innovative financing for development. The group will discuss taxes on speculative financial transactions and the export of weapons.

In a parallel development, a 40-member group that includes Britain, France, Germany, Norway, Mexico, Brazil, South Africa, Spain and Chile announced that it will lead negotiations on how to implement a new International Drug Purchase Facility to fight diseases such as AIDS, tuberculosis and malaria.

Other initiatives for financing development, such as the International Financial Facility (IFF) proposed by the British government, also won support at the conference. Under this proposal money would be raised through bonds to finance immediate development, and repaid through future aid allocation. Essentially this is a proposal to front-load aid rather than spread it out.

The IFF is modeled after the British International Financial Facility for Immunization, which has successfully raised cash to finance vaccination campaigns.

British Finance Minister Gordon Brown said at the Paris conference that "2006 should be the year when the world fashions a long-term strategy for the empowerment of developing countries."

Source: Global Information Network

More News in this Category