Media

We the undersigned are a diverse,  non-partisan group of economists, lawyers, tax experts, public policy analysts, developing country specialists, accountants, advisors on ethics, health specialists, documentary filmmakers, business people, journalists, and anti-poverty, tax justice, and human rights advocates from all G7 countries and several developing democracies. 

We have joined together to request that you consider one very specific, practical proposal  — a financial transactions tax (FTT), to be adopted initially by  G7 members and then proliferated worldwide. 

We believe that a global FTT would eventually raise substantial revenue  for many countries, including for the G7. But given the emergency situation in poor countries right now, our focus here is on them. Given the dominance of G7 financial markets, a G7-wide FTT could quickly start to provide  at least $50 billion a year of emergency finance to fund vital public works and longer-term investments in developing countries, especially struggling young democracies.  

As summarized below, the case for a G7-wide  FTT is strong and the time is now.   

1. We applaud the G7’s support for a minimum global  corporate income tax (CIT) rate for multinational corporations, though its current proposals would do little for poorer countries. Indeed, they would actually reinforce the unfair bias of international tax rules in favor of the richest countries, which host most of these corporations. If this were the only collective tax reform that the G7 undertakes right now, therefore, a huge opportunity will be missed — the chance to help developing countries recover from this historic tax injustice as well from as the pandemic, and to help finance public investments  and advance the cause of international tax justice.
2. In particular, all the incremental revenue from the G7’s proposed CIT rate reform would go to a comparative handful of relatively-affluent  “residence” countries where multinationals have their headquarters—including most of the G7. Given that developing democracies are much more dependent on the CIT for tax revenue, this is not helpful.
3. No one can deny that since March 2020,  the pandemic has inflicted great  hardship on G7 countries, with over 1.1 million deaths, significant economic losses, and untold personal suffering. However, with the help of $trillions in deficit spending, strict public health measures, and abundant vaccines, by now the G7 as a whole is well on its way to economic recovery and to conquering the pandemic.   
4. Sadly, this is not the case in key developing democracies like Argentina, Brazil, Ecuador, India,  Kenya,  Mexico,  Nepal,  Nigeria, Peru, or South Africa, which are still fighting fierce daily “street battles” with new COVID19 cases, vaccine shortages, job losses, rising poverty, crime, terrorism, the climate crisis, and financial instability —  all at once. 
5. Several of these countries were already heavily indebted to begin with,  before the pandemic. They now lack the  tax bases and debt capacity needed to bootstrap themselves out of the crisis. So for many, recovery is not in sight until 2024-25 at best. Essential long-term investments in health, education, and climate preservation have been pushed off the table, and the UN’s SDG 2030 development goals for reducing poverty and inequality are at risk of disappearing over the horizon. Indeed, in several countries, nothing less than the  future of democratic development is now at stake.  
6. Given this situation, we ask you to consider just one specific addition to the G7’s tax reform agenda. This is not an economist’s pipe dream, but a solution that has been field-tested again and again over many years in more than 40 countries and jurisdictions — from Hong Kong and Kenya to New York State and the City of London. The combined revenues raised (or rebated) by these taxes already averages at least $15 to $20 billion a year. Indeed, most G7 countries already have FTTs in various stages of rollout  — they just have to be reinvigorated, harmonized and promoted.
7. There are of course many variations on financial transactions taxes, some of which are quite elaborate. But to seize the opportunity presented by the crisis and get started, we are simply asking the G7 to  agree on a 0.1%  transactions tax on all stock trades, paid for by investors located anywhere in the world who transact through G7 public exchanges.
8. As noted, this approach follows in the footsteps of many other similar taxes that have operated successfully for generations —  in the UK since at least 1714; in New York State since 1905; in Hong Kong for decades. Just this February, Hong Kong raised its stock transaction tax by 30 percent to .26%,  in response to a budget crisis. This move has been a success.
9. While the proposed 0.1% tax rate on stock trades might not sound steep,  it does not need to be any higher to raise large revenues.  Global stock trading has recently been setting records. In 2020, for example, New York’s top two exchanges, the NYSE and the NASDQ, registered nearly $60 trillion in trades, nearly half the total volume of the world’s 85 stock exchanges. At this pace,  even this tiny tax on publicly-traded equities that are transacted on G7 exchanges would easily (and quickly) start to  generate at least $50 billion a year for developing countries, over and above Official Development Assistance (ODA).
10. Of course much more revenue could be generated  — for rich and poor countries alike — if an FTT were widely adopted by financial exchanges in other countries. And even more revenue could be raised if the tax were extended to other traded assets, like bonds, derivatives, currencies, collectibles, crypto-currency,  a variety of hedge fund transactions, and real estate.But these refinements are for the future, given the fact that the immediate needs of developing countries are so dire.  Our focus here is  appropriately on encouraging the G7 to adopt a version of the FTT that is as simple as possible for everyone to implement ASAP, right now.
11. In addition to the global FTT’s main attraction — its proven ability to raise an enormous amount of revenue very quickly —  it also has several other key advantages.  

• First, since most stock trading is conducted by the top 1% of the wealth distribution  and “high-frequency trader” (HFT)  firms, the FTT amounts to a kind of progressive sales tax. If the world is really serious about  finally doing something to tackle soaring global wealth inequality, instead of just prattling on about it,  an FTT is a  very good place to start.  
• Second, despite the huge amount of revenue that a G7-wide FTT would raises, its enforcement costs are relatively low, since most investors (except perhaps the “high freaks”) barely feel any pain on any given trade. Thus in 2020, the average trade on the NASDAQ was $8800, so a 0.1% STT would have cost investors a practically painless $8.80 per trade.
• Third, to the extent that the FTT does “pinch’ certain high-frequency traders, this may actually be a good thing. It enables G7 countries themselves to tackle “the finance curse,” the bloated, unproductive and extractive part of high finance. It promotes longer-term investing and   discourages casino-like stock speculation. It also helps to stem the current plague of HFT abuses like “front-running,” “naked short selling,”  massive high-velocity fake bids that lead to no actual transactions, and the kind of  anonymous “synthetic equity” financing that recently contributed to the Archegos collapse. Indeed, dampening such chicanery, beyond just raising revenue, has long been the favorite reason why leading economists like John Maynard Keynes and James Tobin have supported FTTs.
• Finally, FTTs also dramatically boost financial transparency and help to combat money laundering and corruption — as Kenya recently discovered  when its new FTT surfaced a huge amount of “funny money” washing through Nairobi’s stock exchange.

11. There is only one unavoidable “problem” with our proposal. If the G7 and the G20 were to succeed at evangelizing a global FTT, and they want to share the revenue equitably, they will then be faced with the “problem” of having to distribute tens of $billions of dollars among numerous deserving countries and causes. There are many potential solutions to this distribution problem, none perfect. For example, an international trust fund might be established  to prioritize sound public investments in developing democracies. But this begs the question of how such a  trust fund would be managed.At this stage, we regard this distribution question as a good problem to have. Indeed, it might even force us to establish more effective global fiscal institutions. But the fact that they don’t yet exist is no reason to delay the FTT initiative. The needs of many fragile democracies are so dire right now that the G7 needs to assume that this distribution problem is manageable,  and  just get on with the top priority — implementing a global FTT, as a necessary complement to its CIT reforms.
12. In sum, we believe that the G7 now faces an  extraordinary opportunity.    

• The FTT offers the G7 a chance to promote a progressive tax that would land precisely on the happy few at the very top of the world’s economic ladder who now dominate global stock trading. We suspect that many these people may not even be known to tax authorities. Or, as highlighted in press reports  just this week,  their clever enablers in the legal and accounting professions may have found “legal” dodges that  make them citizens of nowhere for tax purposes — immune to income, estate, property, wealth, and even sales taxes.  
• The public at large has simply had it with such grotesqueries.  The FTT  provides the G7 with a rare opportunity to do something about them with very straightforward enforcement. This nearly-perfect tax could channel $billions from a few hundred thousand wealthy folks at the top to  tens of millions of people at the very bottom, whose very lives may depend on it. The FTT is so minimal and frictionless that it is not even  noticed by most of those who pay it. It is hardly perceptible at all, especially compared with, say, New York City’s 8.875 percent retail sales tax or Europe’s double-digit VAT taxes. But in the right hands and if well spent, the positive impacts of all this tax revenue on the reduction of human suffering will be very perceptible. 
• Finally, the FTT can also help make G7 and global financial markets more efficient and transparent, reducing the “finance curse” and finally helping us to realize the emancipatory dreams of economists from an earlier age.    

What’s not to like?    

In conclusion, we strongly urge you to introduce FTTs throughout the G7 now, and also to work closely with the G20 in this critical global mission.  Not just for your own benefit, but also for the benefit of millions of people in developing countries in this particular moment of acute need. It would be such a shame to see the G7 waste this pandemic crisis only on itself. 

***

Respectfully,

James S. Henry
Global Justice Fellow, Yale
Senior Advisor, TJN

On behalf of the following signatories to this letter
(as of 6/11/21) 

Claire Alet
Journalist (ARTE)
and book author (Le Seuil),
Paris, France

Sarah Anderson
Global Economy Project Director
Inequality.org Co-editor
Institute for Policy Studies
Washington, DC

Brian Ashley
Development Economist
Editor, Amandla Magazine
Cape Town, South Africa

Denis Beckett
Investigative Journalist
Johannesburg, South Africa

Chauncey Bell
CEO Mobilize.Network
Seattle, WA, USA

Pedro Biscay
Ex Director,
Central Bank of Argentina
Buenos Aires, Argentina

William K. Black
Associate Professor of Economics and Law
University of Missouri-KC

Patrick Bond
Professor of Government
University of the Western Cape
Cape Town, South Africa

James Boyce
Professor of Economics
University of Massachusetts- Amherst

Gail Bradbrook
Chair and Cofounder
Extinction Rebellion (UK)

Dominic Brown
Research Director
Alternative Information
and Development Centre (AIDC)
Capetown, South Africa

John Christensen
Chair
Tax Justice Network
London, UK

Frank Clemente,
Executive Director
Americans for Tax Fairness
Washington, DC

Harvey Cox
Profesdor of Divinity Emeritus
Harvard University

Harold Crooks
Filmmaker
New York, NY

Gabriel Crouse
Policy Analyst
RSA Institute for Race Relations
Johannesburg, South Africa

Dick Forslund
Chief Economist
AIDC
Cape Town, South Africa

Naomi Fowler
Producer/ Investigative Journalist
Taxcast Media
London UK/ Sicily Italy

Jorge Alejandro Gaggero
Economist
Buenos Aires, Argentina

James K. Galbraith
Professor of Economics
Lyndon B. Johnson School of Public Affairs
The University of Texas at Austin

Ana Gomes
Ex-MEP EU Parliament
Retired ambassador
Portugal

Erica L. Groshen
Senior Economics Advisor
x BLS Head
School of Industrial + Labor Relations
Cornell University
Ithaca NY

Rob Harrison
Director
Ethical Consumer
Research Association (UK)

James S. Henry, Esq.
Global Justice Fellow
Yale University
Senior Fellow,
Col. U. Center for Sustainable Investment (NY)

David Hillman
Director, Stamp Out Poverty/
Robin Hood Tax Campaign (UK)

Harry J. Holzer
John LaFarge Professor
McCourt School of Public Policy
Georgetown University
Washington, D.c.

Blair Horner
Executive Director
NYPIRG
New York, NY

David Cay Johnston
Pulitzer Prize-winning tax journalist
Editor-in-chief
DCREPORT.org
Rochester, NY

Fadhel Kaboub
Assoc Prof of Econ
Dennison University

Francis Karugu
Global Justice Fellow, Yale
Policy Analyst,
Centre for Fiscal Studies
University of Nairobi (Kenya)

Laurence Kotlikoff
xCEA member
Professor of Economics
Boston University

William Laraque
Major, USMC (ret.)
Professor-Emeritus,
Intl Business + Logistics
Hofstra/ CUNY
New York, NY

Julie Lerat
Independent Film Producer/
Journalist
Paris, France

Ian Masters
Host/ Investigative journalist
Background Briefing
KPFK-TV/
Los Angeles, California

Krishen Mehta
Director, Tax Justice Network
Founder/Director, Asia Initiatives
Former Partner, PwC
New York, NY

Paul M. Morjanoff
Economist/CEO
Financial Recovery Consulting
New South Wales, Australia

Richard Murphy,
Professor of Accounting,
Sheffield U. Management School
Sheffield University (UK)

Ralph Nader
Consumer Advocate
Washington DC

Rachel Neale
Leading Activist
UK Mortgage Prisoners (UK)

Mary Ongore
Senior Researcher,
Comm on Fiscal Studies
School of Law
University of Nairobi (Kenya)

Sol Picciotto
Chair, BEPS Monitoring Group
Intl Center for Tax and Development
Prof of Law Emeritus
Lancaster University (UK)

Marshall Pomer
Macroeconomic Policy Institute
Santa Cruz, California (US)

Thomas Pogge
Professor of Philosophy
Yale University
New Haven, Connecticut

Fernando Porta
Senior Researcher,
UNQ, CIECTI
Buenos Aires, Argentina

Jeffrey D. Sachs
Professor of Economics
Columbia University
New York, NY

Nicholas Shaxson
Investigative Journalist
Berlin, Germany

Khadija Sharife
Investigative Journalist
Africa Editor, OCCRP
Johannesburg South Africa

Prem Sikka
Member of UK House of Lords
Emeritus Professor University of Essex
University of Sheffield (UK)

The Rt Revd Dr Alan Smith
Lord Bishop of St Albans (UK)

Aaron Sojourner
Associate Professor of Economics
University of Minnesota
Minneapolis, Minnesota

David E. Spencer, Esq.
Tax Attorney
New York, NY

Jézabel Couppey-Soubeyran
Assistant Professor of Economics
Pantheon-Sorbonne
Paris, France

Rep. Phil Steck
Member, NYS Assembly
District 110
Albany, NY

Jorge E. Taiana
x Foreign Minister
Argentina

Zephyr Teachout
Associate Professor of Law
Fordham University (NY)

John Tizard
Director
Taxpayers Against Poverty
Shefford (UK)

Oscar Ugarteche
Economist
Instituto de Investigaciones Económicas
National Autonomous University of Mexico (UNAM)

Juan Valerdi
Professor of Economics
UNLP (La Plata Nacional university)
Argentina

Peter Yaholkovsky, MD.
Grass Valley, CA

Victor Yannacone Jr.
Attorney (Agent Orange case etc)
Patchogue, NY

Matti Ylönen
University Lecturer, World Politics
University of Helsinki (Finland)