Nicolas Sarkozy has taken a lot of well-deserved heat for his austerity measures. But I have to hand it to the French President for one thing – he’s stood tough in his push to increase taxes on the financial sector.
Despite an icy response from the U.S. Treasury Department, Sarkozy and German Chancellor Angela Merkel have continued to push for a G-20 agreement on financial transactions taxes (FTTs, or what many in the United States call “financial speculation taxes”).
The idea is to place a small levy on each trade of stocks, derivatives, currency, and other financial instruments as a way to generate revenues for jobs and other domestic and international needs. Such taxes could also discourage the short-term financial speculation that has little social value but poses high risks to the economy.
A report by my organization, the Institute for Policy Studies, points out that if a tax of 0.25 percent had been in place during the worst 20 minutes of the May 2010 “flash crash,” it would have cost securities traders $142 million.
Sarkozy recently reiterated his determination to press for a G-20 agreement on FTT when he takes over as chair in 2011. There is, however, no reason to delay.
A global civil society statement calling on G-20 leaders to take action at the Seoul summit cites several examples of how some unexpected sources have recently strengthened the case for an FTT. A new IMF technical paper points out that most G20 countries have already implemented some form of transaction tax and offers tips on designing the taxes to make them most effective. The paper also confirms that such taxes can generate substantial revenues, backing up a European Commission report which estimates that an international FTT could generate more than $1 trillion per year.
As one of the few options that could generate the financial resources needed to pay for the costs of the global crisis, FTT deserves a central spot on the G-20 agenda.