The COP29 meeting in Azerbaijaan is heading for yet another dismal failure. Everyone seems to agree that developing countries need over $1 trillion a year to cope with the effects of climate change and yet the rich countries are only prepared to commit to $250 million a year "by 2035". Not surprisingly, there are many very angry people. It's outrageous that our leaders get away only promising to do anything in 10 years time, when they will probably no longer be in power. It's easy to sign cheques that will only be paid by a future government.
No, the payments have to be in 2025, not 2035.
And yet, there is a simple solution. It's based on an idea that I have been pushing since 2012 where I was already arguing that a tiny Global tax on Financial Transactions could eliminate the need for most taxes. See, for example, my TEDx talk (in French) called "Vers un monde (pratiquement) sans taxes" or my presentation of "The 0.0.0.x Tax Reform Plan" from 17th March 2012.
In 2021, I posted "COP26 - Proposition
#2 - Decide how much funding is required and then propose universal FTT
and Asset taxes to provide the finance."
Then, last year, I simplified things by concentrating only on the Financial Transaction Tax For the COP 28 meeting in Dubai, I posted that "The COP meeting has to find at least $3 trillion a year of funding to fight climate change. Here's how" and only talked about the FTT mechanism.
So, here I go again. We simply need to implement a tiny tax on the world's financial transactions to solve the problem. What rate of tax would be needed to find the $1.2 trillion a year for developing countries? I just looked at the levels of transactions reported by the Bank for International Settlements whose latest figures allowed me to find $18.1 quadrillion of transactions for just 24 countries in 2022. It follows that you would just need to tax those transactions at 0.006% to pay the bill.
Frankly, is that to much to ask?
The idea is that everyone, including you and me would pay. But I'm not sure I would really notice if my Credit card company charged me an extra 0.006% to help save the planet. After all, the Credit Card companies are already charging Merchants credit card processing fees of 1.5 to 3.5%.
Of course, the traders and banks who are doing the bulk of the $18.1 quadrillion will not be happy and will say that they could not possibly afford to pay 0.006%. They will lobby governments to ensure that such taxes are not imposed. But the fact is that they already have to pay to use Real-time Gross Settlement Systems such as the UK's CHAPS system. According to the Bank of England, the charges include an annual charge of £30,000, plus a per item fed of 31.9p. So no, adding in 0.06% is just going to add a bit more.
Nevertheless, I can imagine that there will be complaints that some other sites located in tax-havens might get away with paying nothing and have an unfair advantage.
But here I have another suggestion, which I suspect could be a stroke of genius - he says modestly ;-)
Suppose that the UN agency that is trying to collect the $1.2 trillion says that they will impose a financial transaction tax that is just enough to generate the required amount. If only the $18.1 quadrillion listed by the BIS is taxed, I have said that it would require 0.006%. But suppose that the Options Clearing Corporation, which did over 11 billion trades last year, does not publish the value of those trades and tries to avoid paying. Other players could blow the whistle and reveal the level of hidden transactions and ensure that every actor pays. And they we would be rewarded by getting their own tax rates reduced from 0.06%. The more they reveal the existence of actors in secretive locations who are doing untaxed transactions, the less they would have to pay.
The system would thus provide a strong incentive for all those involved in doing transactions to report, and those that try and hide would get called out. Neat, eh?
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