Global Tax Initiatives: The Movement for the Currency Transaction Tax
15 Jan 2007
The currency transaction tax (CTT), first proposed in 1972, is an idea for a tax levied on every currency exchange, set at a level low enough not to hinder transactions needed to finance trade in goods and services, or long-term investments. The establishment of the CTT, or a new organization to govern the CTT, would potentially constitute a far-reaching global regulatory change.
This paper asks two sets of questions. First, what have been, and are, the causes of the emergence, rise and development of both the transnational campaign for the CTT and the related worldwide movements and networks? Second, what are the conditions of success of different strategies for global regulatory change, in this case the CTT? And consequently, what models for the CTT, and strategies to realize them, are feasible, and what effects would they have?
The first part of the paper draws on the Braithwaite and Drahos scheme, according to which there are recurrent proactive and reactive sequences of strategic action to secure global regulatory change, such as the establishment of the CTT.
By the mid-1990s, the CTT started to be discussed in the context of trying to find alternative sources of funding for the United Nations system, and, more generally, for global efforts to reduce absolute poverty. However, until the Asian crisis of 1997–1998, interest in the CTT was usually triggered by major financial crises, and then died out when the crisis passed from the headlines. In part as a reaction to this situation, a more systematic and organized global campaign for the CTT finally emerged.
Although many non-governmental organizations (NGOs) celebrated the Belgian CTT law of 1 July 2004 as a major breakthrough, no CTT in the sense of the original proposal is in sight. What remains on the agenda of global politics is a neoliberal version of the tax that aims at finding alternative sources of funding for development. The CTT campaign is now divided between those who would like to see a minimalist CTT implemented unilaterally by individual countries or the European Union, and those who are struggling for global regulatory changes.
The second part of the paper analyses and assesses the two different visions of the CTT. War on Want—an international development NGO based in London—has been advocating a minimalist version of the CTT. The Draft Treaty on Global CTT outlines an alternative model more in line with the aspirations of ATTAC and other organizations and movements participating in the World Social Forum process. In the latter model, the tax is set at a sufficiently high level to curb the power of transnational financial flows.
The paper concludes by discussing possible futures in terms of the conditions for success of different visions and strategies of realizing the CTT.
Heikki Patomäki is professor of International Relations at the University of Helsinki.
Order PP-CSSM-27 from UNRISD, 30 pages, 2006; US$ 12 for readers in industrialized countries and US$ 6 for readers in developing and transitional countries and for students.