wfn.org | Currency transfer tax

["Sheila Mesa" <smm@wcc-coe.org>]

Currency transfer tax : "an idea whose time has come"
Panel discussion prepares for Geneva 2000

Cf. WCC Release of 5 April 2000

The idea of a "currency transfer tax'' to restrain the movement of capital by currency speculators and produce funds for development is gaining widespread acceptance, according to participants in a panel discussion held at the United Nations with church sponsorship.

Panelists said the proposal was not likely to be adopted soon, but that it was under discussion in many places and could now be called "an idea whose time has come".

The panel, held on Friday, 7 April at UN headquarters in New York, was sponsored by the World Council of Churches (WCC), the Canadian Council of Churches, International Cooperation for Development and Solidarity, a federation of Roman Catholic organizations, (commonly known as CIDSE from the initials of its original French name) and the UN Division for Social Policy and Development.

Those attending included members of an ecumenical team the WCC and the Lutheran World Federation (LWF) brought to New York for the 3-14 April meeting of a preparatory committee laying the groundwork for Geneva 2000, a gathering to be held in June to review the 1995 Copenhagen Summit on Social Development.

The proposal for the currency transfer tax has been promoted by people who believe the ability of governments to carry out policies of social development is undermined by the vulnerability of their economies to international speculation in currencies.

Wayne Easter, a member of the Canadian House of Commons, reported that the idea was being discussed in the parliaments of other countries.  This was important, he said, since "There is no question the Canadian government is going to keep this alive." 
 
Although economically weaker countries have expressed special concern about disruptive patterns of currency transfer, Easter said Canada's economy was also endangered in the mid-1990s.  When one speculator in New York called Canada a "basket case", the value of its currency was so severely threatened that special efforts were required to support it, he said.

Easter, a member of the United Church of Canada, contended that the world could move beyond the idea that economics determined everything, and develop strategies for social change.

Lidy B. Nacpil, secretary general of Jubilee South, an organization formed last year and based in the Philippines, described the human costs of unregulated capital movement and said it hampered the ability of countries to manage their own economies.

Such movement is called "casino capital" for its character as a gamble. When "the bubble burst" in 1997 and produced the financial crisis in Asia, the consequences were social, political and environmental, she said.

Nacpil, a member of the Methodist Church of the Philippines, said the crisis caused millions to lose their jobs, and in some cases the result was children going to work and "losing their childhood".

Bart Bode, representing CIDSE, noted that various forms of the currency transfer tax had been proposed. A form of the tax had been imposed by a French king in 1315 to limit the influence of bankers in Lombardy. But the idea as currently discussed is generally dated to a proposal by an American economist, James Tobin, in 1978.

Paul Bernd Spahn, an economics professor in Frankfurt, Germany, later developed a variation on the Tobin proposal, suggesting a much lower rate of taxation for normal transfers but allowing for large increases in times of financial crisis. The Spahn approach would make it easier to get acceptance of the tax, and leave less incentive for speculators to seek ways of evading it through tax havens, Bode said.

John Langmore, director of the UN's Division of Social Development and a member of the WCC's Commission of the Churches on International Affairs (CCIA), said a currency transfer tax would be easier to collect than most other taxes because international currency transfers were handled at only a limited number of places.

The central question associated with the tax, he said, was determining who would exercise the greater power over a nation's economy - its own government or the international financial markets.

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