Paris – The decision by French President Nicolas Sarkozy to push ahead with a financial transactions tax (FTT) may be a political ploy ahead of elections, but it has the approval of many non-governmental organisations, even as support lags elsewhere.
“If France is setting an example, we support this as a principle,” said Matt Davies, head of international policy and advocacy for international movement ATD Fourth World, a French-based organisation that works to eradicate extreme poverty.
“I think there’s a consensus in society that there should be a far greater accountability by the financial sector,” he told IPS in an interview. “What’s important is that the money that’s brought in by the FTT should go towards combating poverty, but we’re slightly sceptical in some ways because we often see that money destined for development doesn’t reach the poorest people.”
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Sarkozy said this week that the French government may implement the tax without waiting for its European or G20 partners to come on board. “If France waits for others to tax finance, then finance will never be taxed,” the President said in a speech.
The United Kingdom and the United States oppose the so-called Robin Hood tax, with government officials saying that it would damage efforts to boost the economy and may cause financial firms to flee to other countries or regions.
In contrast, German Chancellor Angela Merkel has expressed support for the FTT but would like members of the 27-nation European Union to agree on the measure before its imposition.
Merkel has said that the tax would be the “right signal to show that we have understood that financial markets have to contribute their share to the recovery of economies.”
That is a line that echoes the French position. France’s minister for cooperation, Henri de Raincourt, told IPS that parliamentarians were “absolutely unanimous on the need to find innovative financing…and ready to consider that the financial sector, which is one of the sectors that profits from globalisation, should be made to provide this funding.”
France tried to put the tax on the agenda during its presidency last year of the G8 and G20 groups of countries, but the issue was sidelined as the euro-zone crisis worsened.
Now, as Sarkozy prepares for the country’s two-round elections in April and May, some have accused him of using the tax as a political tactic, especially as the opposition Socialist party would feel compelled to support such a levy.
Whatever the motives, the end result would still be desirable if the FTT raises enough money to aid development, especially in poor countries, says Daniel Pentzlin, sustainable finance campaigner for Friends of the Earth Europe.
“The financial transaction tax won’t harm normal people or the economy because the percentage is so low,” he told IPS. “It might drive high-frequency speculative trading out of Europe, but actually we don’t need this market because its harmful in the long run as we’ve seen.
“The FTT is nothing more than something like a value-added tax on financial transactions, and VAT levels are different from country to country,” Pentzlin continued. “This shows that everyone can set their own tariff. France shouldn’t have to wait on others for this.”
By implementing a levy of between 0.01 and 0.1 percent on financial transactions, such as the trading of stocks and bonds, France could gain up to 12 billion euros a year, according to the International Monetary Fund. At the European level, about 50 billion euros could be raised annually, the IMF says.
EU finance ministers are scheduled to discuss the tax in March, but French government officials say it could be presented here as early as next month. The Senate has already passed a bill in November approving the levy.
While France’s financial sector remains resistant to the idea, non-governmental organisations point out that the financial sector is continuing to make profits despite the global economic crisis. And some of the profit-making is causing additional hardships to the world’s poor, they say.
A report published by Friends of the Earth Europe states that “European banks, pension funds and insurance companies are increasing global hunger and poverty by speculating on food prices and financing land grabs in poorer countries.”
The report examines the activities of 29 European banks, pension funds and insurance companies, including Deutsche Bank, Barclays, RBS, Allianz, BNP Paribas, AXA, HSBC, Generali, Allianz, Unicredit and Credit Agricole. It suggests that there is “significant involvement of these financial institutions in food speculation, and the direct or indirect financing of land grabbing.”
Friends of the Earth Europe and other organisations are calling for strict regulation to rein in these activities, and they believe that a tax on financial transactions would also help to decrease speculative trading in commodities.
“Food speculation, with billions of euros flooding in and out of financial products based on foodstuffs, causes price volatility,” the group said in a statement this week. “These rapid and unpredictable price swings hit the most vulnerable hardest, threatening their right to food, and making it more difficult for farmers to maintain an income – creating instability, hunger and poverty.”