News Release

G7’s Minimal Corporate Tax Proposal; Case for a Financial Transaction Tax

A group of economists and others have just released a letter to the G7 urging the adoption of a Financial Transaction Tax, see PDF.

The letter states: “We believe that a global FTT would eventually raise substantial revenue for many countries, including for the G7. But given the emergency situation in poor countries right now, our focus here is on them. Given the dominance of G7 financial markets, a G7-wide FTT could quickly start to provide at least $50 billion a year of emergency finance to fund vital public works and longer-term investments in developing countries, especially struggling young democracies.”

The signers include James S. Henry, global justice fellow at Yale and senior advisor, Tax Justice Network, who organized the letter; James K. Galbraith professor of economics at the  Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin; Sarah Anderson, Global Economy Project director at Inequality.org co-editor, Institute for Policy Studies; Pedro Biscay, former director, Central Bank of Argentina Buenos Aires; Ralph Nader, consumer advocate; William K. Black, associate professor of economics and law, University of Missouri-KC; Patrick Bond, professor of government, University of the Western Cape Cape Town, South Africa.

The signers write that while they “applaud the G7’s support for a minimum global corporate income tax (CIT) rate for multinational corporations,” the G7’s “current proposals would do little for poorer countries. Indeed, they would actually reinforce the unfair bias of international tax rules in favor of the richest countries, which host most of these corporations. If this were the only collective tax reform that the G7 undertakes right now, therefore, a huge opportunity will be missed — the chance to help developing countries recover from this historic tax injustice as well from as the pandemic, and to help finance public investments and advance the cause of international tax justice.”

The group suggests a very small tax: “a 0.1 percent transactions tax on all stock trades, paid for by investors located anywhere in the world who transact through G7 public exchanges.”

Still, substantial funds could be raised: “In 2020, for example, NewYork’s top two exchanges, the NYSE and the NASDQ, registered nearly $60 trillion in trades, nearly half the total volume of the world’s 85 stock exchanges.”

They add that to the “extent that the FTT does ‘pinch’ certain high-frequency traders, this may actually be a good thing. It enables G7 countries themselves to tackle ‘the finance curse,’ the bloated, unproductive and extractive part of high finance. It promotes longer-term investing and discourages casino-like stock speculation. …

“This nearly-perfect tax could channel $billions from a few hundred thousand wealthy folks at the top to tens of millions of people at the very bottom, whose very lives may depend on it. The FTT is so minimal and frictionless that it is not even noticed by most of those who pay it. It is hardly perceptible at all, especially compared with, say, New York City’s 8.875 percent retail sales tax or Europe’s double-digit VAT taxes. But in the right hands and if well spent, the positive impacts of all this tax revenue on the reduction of human suffering will be very perceptible. …

“FTTs also dramatically boost financial transparency and help to combat money laundering and corruption — as Kenya recently discovered when its new FTT surfaced a huge amount of ‘funny money’ washing through Nairobi’s stock exchange.”

Available for interviews:

JAMES HENRY, jsh11963@gmail.com@submergingmkt
Henry is Global Justice Fellow at Yale University, senior advisor to the Tax Justice Network and managing director at the Sag Harbor Group.