A world taxation system or global tax is a hypothetical system for the collection of taxes by a central international revenue service. The idea has garnered currency as a means of eliminating tax avoidance and tax competition; it has also aroused the ire of nationalists as an infringement upon national sovereignty.
Discussion of a global financial transaction tax (FTT) increased in the 2000s, especially after the late-2000s recession, and especially in Europe. In 2010, a coalition of 50 charities and other NGOs began advocating for what they labelled a Robin Hood tax, which would tax transactions of stocks, bonds and other financial securities.
In 2011, the European Union (EU) proposed an EU-wide FTT; consensus, however, could not be reached among all EU countries. In 2013, 11 countries in the EU's Eurozone established the European Union financial transaction tax, estimated to generate €35 billion per year. [1]
In 2012, a group of UN experts recommended that the United Nations adopt a FTT, estimating that the tax could bring $48-$250 billion in revenue, to be channelled to "fighting poverty, reversing growing inequality, and compensating those whose lives have been devastated by the enduring global economic crisis". [2]
In the UK, bank taxes have been proposed as another means of worldwide taxation, as have been sales taxes. Proposals to combat the ongoing recession included the Financial stability contribution (FSC) [3] [4] and Financial Activities Tax (FAT). [5] On August 30, 2009, British Financial Services Authority chairman Lord Adair Turner said it was "ridiculous" to think he would propose a new tax on London and not the rest of the world. [6] However, in May, and June 2010, the government of Canada expressed opposition to the bank tax becoming "global" in nature. [7]
The Tobin tax is a tax on all conversions of money from one currency to another, proposed by Nobel Prize-winning American economist James Tobin. According to Dr. Stephen Spratt, "the revenues raised could be used for....international development objectives...such as meeting the Millennium Development Goals." [8] These are eight international development goals that 192 United Nations member states and at least 23 international organizations have agreed (in 2000) to achieve by the year 2015. They include reducing extreme poverty, reducing child mortality rates, fighting disease epidemics such as AIDS, and developing a global partnership for development. [9]
In 2000, a representative of a “pro-Tobin tax” NGO proposed the following: "In the face of increasing income disparity and social inequity, the Tobin Tax represents a rare opportunity to capture the enormous wealth of an untaxed sector and redirect it towards the public good. Conservative estimates show the tax could yield from $150-300 billion annually. The UN estimates that the cost of wiping out the worst forms of poverty and environmental destruction globally would be around $225 billion per year." [10]
At the UN September 2001 World Conference against Racism, when the issue of compensation for colonialism and slavery arose on the agenda, Fidel Castro, the President of Cuba, advocated the Tobin Tax to address that issue. (According to Cliff Kincaid, Castro advocated it "specifically in order to generate U.S. financial reparations to the rest of the world," however a closer reading of Castro's speech shows that he never did mention "the rest of the world" as being recipients of revenue.) Castro cited Holocaust reparations as a previously established precedent for the concept of reparations. [11] [12]
Castro also suggested that the United Nations be the administrator of this tax, stating the following:
"May the tax suggested by Nobel Prize Laureate James Tobin be imposed in a reasonable and effective way on the current speculative operations accounting for trillions of US dollars every 24 hours, then the United Nations, which cannot go on depending on meager, inadequate, and belated donations and charities, will have one trillion US dollars annually to save and develop the world. Given the seriousness and urgency of the existing problems, which have become a real hazard for the very survival of our species on the planet, that is what would actually be needed before it is too late." [11]
On March 6, 2006, US Congressman Dr Ron Paul stated the following: "The United Nations remains determined to rob from wealthy countries and, after taking a big cut for itself, send what’s left to the poor countries. Of course, most of this money will go to the very dictators whose reckless policies have impoverished their citizens. The UN global tax plan...resurrects the long-held dream of the 'Tobin Tax'. A dangerous precedent would be set, however: the idea that the UN possesses the legitimate taxing authority to fund its operations." [13]
The idea of a global wealth tax has been much discussed since the 2014 success of French economist Thomas Piketty's bestseller Capital in the Twenty-First Century. [14] In the book, Piketty proposes that because the rate of return on capital tends to exceed total growth, inequality will tend to rise forever without government intervention. The solution he proposed is a global tax on capital. He imagined that the tax would be zero for those with less than 1 million euros, 2% for those with more than 5 million, and 5-10% for those with more than 1 billion euros. [15] Piketty suggested the revenue could provide all global citizens with an endowment when they reach the age of 25 years. [16]
It has been estimated that for the US, a tax of 2% on fortunes greater than US$4 million would generate US$500 billion per year. [15] About half of that amount, about 300 billion per year, corresponds to the total developmental budget goal of 0.7% GNP of industrialised countries (see Millennium Development Goals), which would enable poorer countries to cross the threshold of economic competitivity in 15–20 years (cf. Jeffrey Sachs: The End of Poverty). Some 300 billion per year would also be necessary to limit global warming to +2 degrees Celsius and finance recovery from more frequent climate disasters. Expensive but probably inevitable strategies to slow global warming include renewable energy research, reducing greenhouse gas emissions, and reforestation (or preventing deforestation). [17]
From the 2020s, Patriotic Millionaires, a group of high net worth individuals, began calling for governments to implement wealth taxes of those with extreme wealth. In 2023, they penned an open letter to political leaders attending Davos, stating "The solution is plain for all to see. You, our global representatives, have to tax us, the ultra rich, and you have to start now." [18] Oxfam said a tax of up to 5% on the world’s multimillionaires and billionaires could raise $1.7tn a year, enough to lift 2 billion people out of poverty. [19]
Leading up to a 2023 finance summit in France, 100 leading economists signed a letter calling for a wealth tax on the world's richest people in order to help the poorest survive climate change. [20]
The Kyoto Protocol of 1997, which was signed by 192 countries, included a proposal for an International Emissions Trading scheme. Subsequently, this was superseded by Article 6 of the Paris Agreement which stated the principle of international carbon trading. Consequently, some national emissions trading schemes are theoretically compatible with those of other nations whose schemes have similar standards. In 2017, the EU agreed to link the European Union Emissions Trading System to the Switzerland emissions trading system. [21]
In order not to advantage countries without a carbon price, the EU has designed the Carbon Border Adjustment Mechanism to come into effect in 2026, which will place tariffs on imported goods which have not been subjected to a carbon price. Similar discussions have been ongoing in the US [22] and Australia [23] among others. The OECD has proposed creating an international framework for such carbon border adjustments to avoid trade competition. [24]
Kristalina Georgieva, managing director of the IMF, has proposed an international carbon price floor, [25] noting that four fifths of global emissions remain unpriced. However, this only requires revenue to be collected by national governments, so it not truly a global tax.
In the 2020s, there has been discussion of global carbon taxes among the international community, including the OECD, World Trade Organization and International Monetary Fund. [26] It was suggested that a uniform global carbon tax could eliminate the need for carbon border tariffs. Some research has suggested that such a proposal could be popular if the revenue generated by the tax is paid directly to citizens, [27] a payment known as a carbon dividend.
By 2021, global industry-wide carbon taxes were supported by groups representing 90% of the shipping industry, including the International Chamber of Shipping, Bimco, Cruise Lines International Association and the World Shipping Council. [28] The International Maritime Organization reached agreement in 2022 that a global carbon tax for shipping should be established. [29] However, there is wide disagreement about the price level, with proposals ranging from $150 to just $2 per tonne of fuel.
In 2023, research from CE Delft found that global shipping emissions could be cut by between a third to a half by 2030 without harming international trade. [30] This was important since countries including China, India, Brazil and Saudi Arabia had expressed opposition to the tax, on the basis that it could put international trade at risk. The World Bank has estimated a shipping carbon tax could raise $50-60 billion per year, [31] which some countries have proposed be donated to a "loss and damage" fund, [32] to pay for damage caused by climate change.
By 2024, 47 countries supported the proposal, including the European Union, Canada, Japan and the Pacific Islands. Research suggested that low-carbon ammonia shipping could be unlocked at a $150 carbon price. [33]
In the US and other countries' nationalist movements, the idea of global taxation arouses ire in its perception by such circles as a potential infringement upon national sovereignty. [34]
The Kyoto Protocol (Japanese: 京都議定書, Hepburn: Kyōto Giteisho) was an international treaty which extended the 1992 United Nations Framework Convention on Climate Change (UNFCCC) that commits state parties to reduce greenhouse gas emissions, based on the scientific consensus that global warming is occurring and that human-made CO2 emissions are driving it. The Kyoto Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. There were 192 parties (Canada withdrew from the protocol, effective December 2012) to the Protocol in 2020.
A Tobin tax was originally defined as a tax on all spot conversions of one currency into another. It was suggested by James Tobin, an economist who won the Nobel Memorial Prize in Economic Sciences. Tobin's tax was originally intended to penalize short-term financial round-trip excursions into another currency. By the late 1990s, the term Tobin tax was being applied to all forms of short term transaction taxation, whether across currencies or not. The concept of the Tobin tax is being picked up by various tax proposals currently being discussed, amongst them the European Union Financial Transaction Tax as well as the Robin Hood tax.
Environmental finance is a field within finance that employs market-based environmental policy instruments to improve the ecological impact of investment strategies. The primary objective of environmental finance is to regress the negative impacts of climate change through pricing and trading schemes. The field of environmental finance was established in response to the poor management of economic crises by government bodies globally. Environmental finance aims to reallocate a businesses resources to improve the sustainability of investments whilst also retaining profit margins.
A carbon tax is a tax levied on the carbon emissions from producing goods and services. Carbon taxes are intended to make visible the hidden social costs of carbon emissions. They are designed to reduce greenhouse gas emissions by essentially increasing the price of fossil fuels. This both decreases demand for goods and services that produce high emissions and incentivizes making them less carbon-intensive. When a fossil fuel such as coal, petroleum, or natural gas is burned, most or all of its carbon is converted to CO2. Greenhouse gas emissions cause climate change. This negative externality can be reduced by taxing carbon content at any point in the product cycle.
The Clean Development Mechanism (CDM) is a United Nations-run carbon offset scheme allowing countries to fund greenhouse gas emissions-reducing projects in other countries and claim the saved emissions as part of their own efforts to meet international emissions targets. It is one of the three Flexible Mechanisms defined in the Kyoto Protocol. The CDM, defined in Article 12 of the Protocol, was intended to meet two objectives: (1) to assist non-Annex I countries achieve sustainable development and reduce their carbon footprints; and (2) to assist Annex I countries in achieving compliance with their emissions reduction commitments.
Carbon offsetting is a carbon trading mechanism that enables entities such as governments or businesses to compensate for their greenhouse gas emissions by investing in projects that reduce, avoid, or remove emissions elsewhere.
The European Union Emissions Trading System is a carbon emission trading scheme which began in 2005 and is intended to lower greenhouse gas emissions by the European Union countries. Cap and trade schemes limit emissions of specified pollutants over an area and allow companies to trade emissions rights within that area. The EU ETS covers around 45% of the EU's greenhouse gas emissions.
Greenhouse gas inventories are emission inventories of greenhouse gas emissions that are developed for a variety of reasons. Scientists use inventories of natural and anthropogenic (human-caused) emissions as tools when developing atmospheric models. Policy makers use inventories to develop strategies and policies for emissions reductions and to track the progress of those policies.
The energy policy of the European Union focuses on energy security, sustainability, and integrating the energy markets of member states. An increasingly important part of it is climate policy. A key energy policy adopted in 2009 is the 20/20/20 objectives, binding for all EU Member States. The target involved increasing the share of renewable energy in its final energy use to 20%, reduce greenhouse gases by 20% and increase energy efficiency by 20%. After this target was met, new targets for 2030 were set at a 55% reduction of greenhouse gas emissions by 2030 as part of the European Green Deal. After the Russian invasion of Ukraine, the EU's energy policy turned more towards energy security in their REPowerEU policy package, which boosts both renewable deployment and fossil fuel infrastructure for alternative suppliers.
Norway is a large energy producer, and one of the world's largest exporters of oil. Most of the electricity in the country is produced by hydroelectricity. Norway is one of the leading countries in the electrification of its transport sector, with the largest fleet of electric vehicles per capita in the world.
Carbon pricing is a method for governments to address climate change, in which a monetary cost is applied to greenhouse gas emissions in order to encourage polluters to reduce the combustion of coal, oil and gas – the main driver of climate change. The method is widely agreed to be an efficient policy for reducing greenhouse gas emissions. Carbon pricing seeks to address the economic problem that emissions of CO2 and other greenhouse gases (GHG) are a negative externality – a detrimental product that is not charged for by any market.
Certified emission reductions (CERs) originally designed a type of emissions unit issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions achieved by CDM projects and verified by a DOE under the rules of the Kyoto Protocol.
Carbon emission trading (also called carbon market, emission trading scheme (ETS) or cap and trade) is a type of emission trading scheme designed for carbon dioxide (CO2) and other greenhouse gases (GHG). It is a form of carbon pricing. Its purpose is to limit climate change by creating a market with limited allowances for emissions. This can reduce the competitiveness of fossil fuels, and instead accelerate investments into renewable energy, such as wind power and solar power. Fossil fuels are the main driver for climate change. They account for 89% of all CO2 emissions and 68% of all GHG emissions.
A financial transaction tax (FTT) is a levy on a specific type of financial transaction for a particular purpose. The tax has been most commonly associated with the financial sector for transactions involving intangible property rather than real property. It is not usually considered to include consumption taxes paid by consumers.
The Robin Hood tax is a package of financial transaction taxes (FTT) proposed by a campaigning group of civil society non-governmental organizations (NGOs). Campaigners have suggested the tax could be implemented globally, regionally, or unilaterally by individual nations.
The economics of climate change mitigation is a contentious part of climate change mitigation – action aimed to limit the dangerous socio-economic and environmental consequences of climate change.
Coal, cars and lorries vent more than a third of Turkey's six hundred million tonnes of annual greenhouse gas emissions, which are mostly carbon dioxide and part of the cause of climate change in Turkey. The nation's coal-fired power stations emit the most carbon dioxide, and other significant sources are road vehicles running on petrol or diesel. After coal and oil the third most polluting fuel is fossil gas; which is burnt in Turkey's gas-fired power stations, homes and workplaces. Much methane is belched by livestock; cows alone produce half of the greenhouse gas from agriculture in Turkey.
Carbon pricing in Canada is implemented either as a regulatory fee or tax levied on the carbon content of fuels at the Canadian provincial, territorial or federal level. Provinces and territories of Canada are allowed to create their own system of carbon pricing as long as they comply with the minimum requirements set by the federal government; individual provinces and territories thus may have a higher tax than the federally mandated one but not a lower one. Currently, all provinces and territories are subject to a carbon pricing mechanism, either by an in-province program or by one of two federal programs. As of April 2023 the federal minimum tax is set at CA$65 per tonne of CO2 equivalent, set to increase to CA$170 in 2030.
Green recovery packages are proposed environmental, regulatory, and fiscal reforms to rebuild prosperity in the wake of an economic crisis, such as the COVID-19 pandemic or the Global Financial Crisis (GFC). They pertain to fiscal measures that intend to recover economic growth while also positively benefitting the environment, including measures for renewable energy, efficient energy use, nature-based solutions, sustainable transport, green innovation and green jobs, amongst others.
The Carbon Border Adjustment Mechanism (CBAM) is a carbon tariff on carbon intensive products, such as steel, cement and some electricity, imported to the European Union. Legislated as part of the European Green Deal, it takes effect in 2026, with reporting starting in 2023. CBAM was passed by the European Parliament with 450 votes for, 115 against, and 55 abstentions and entered into force on 17 May 2023.
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