UN calls for international tax to raise $400 billion to finance development needs

The United Nations is proposing an international tax, combined with other innovative financing mechanisms, to raise more than $400 billion annually for development and global challenges such as fighting climate change.

In its annual report on global development, World Economic and Social Survey 2012: In Search of New Development Finance, (WESS 2012) launched today, the UN says, in the midst of difficult financial times, many donor countries have cut back on development assistance. In 2011, for the first time in many years, aid flows declined in real terms.

The survey finds that the financial needs of developing countries have long outstripped the willingness and ability of donors to provide aid. And finding the necessary resources to achieve the Millennium Development Goals and meet other global challenges, such as addressing climate change, will be tough, especially for least developed countries.

The need for additional and more predictable financing has led to a search for new sources – not as a substitute for aid, but as a complement to it. A number of innovative initiatives have been launched during the past decade, mainly to fund global health programmes aimed at providing immunizations, AIDS and tuberculosis treatments to millions of people in the developing world. The UN survey finds that while these initiatives have successfully used new methods to channel development financing to combat diseases, they have hardly yielded any additional funding on top of traditional development assistance.

"Donor countries have fallen well short of their aid commitments and development assistance declined last year because of budget cuts, increasing the shortfall to $167 billion,” according to the lead author of the survey, Rob Vos. “Although donors must meet their commitments, it is time to look for other ways to find resources to finance development needs and address growing global challenges, such as combating climate change.”

“We are suggesting various ways to tap resources through international mechanisms, such as coordinated taxes on carbon emissions, air traffic, and financial and currency transactions,” Mr. Vos said. “Such taxes also make economic sense, as they help stimulate green growth and mitigate financial market instability. In short, such new financing mechanisms will help donor countries overcome their record of broken promises to their own benefit the world at large.”

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** World Economic and Social Survey

The World Economic and Social Survey (WESS) provides objective analysis of pressing long-term social and economic development issues, and discusses the positive and negative impact of corresponding policies.