Support for tax to fund global aid

A scheme to levy a European-wide tax to fund lifting the world's poorest countries from poverty is winning broad support, European…

A scheme to levy a European-wide tax to fund lifting the world's poorest countries from poverty is winning broad support, European Union finance ministers said at the weekend

There was no comment available from the spokesman for the Minister for Finance, Mr Cowen, as to what Ireland's position on such a move was. Mr Cowen was not in London at the weekend.

A special tax on EU air travel through a levy on aviation fuel is one proposal that has strong backing, the EU finance ministers' leader Mr Jean-Claude Juncker of Luxembourg said.

The topic of funding development aid will be a centrepiece of their summit in May as top industrial nations seek ways to drive forward their promise to lift Africa from poverty, Mr Juncker said after the G7 in London pledged to increase debt relief.

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"I have the knowledge that most of the EU finance ministers are in favour of taxation of kerosene in order to bring further aid and funding to our development policy," Mr Juncker said at a G7 news briefing.

France's finance minister Mr Herve Gaymard also said he was confident of quick action by Europe on a special tax - though not necessarily on aviation fuel.

"I feel there is a will in Europe to move quickly, but I am not able to say what form of taxation will be accepted," Mr Gaymard said at a separate G7 news briefing.

The G7 finance ministers, in a compromise deal on debt relief for the world's poorest countries,agreed to set up working groups to explore ways to finance writing off as much as 100 percent of their debt and new development aid funding.

Mr Juncker said the EU finance ministers are ready to move ahead, starting with the EU finance ministers' meeting this month, culminating in their mini-summit in Luxembourg in May.

"This is the time for taking action. We have had so much rhetoric. We have had so many speeches. Now is the time to take critical action," said Mr Juncker, who currently holds the EU presidency and is head of the Eurogroup of finance ministers.

They will explore special taxes or alternative funding mechanisms because the bulk of EU governments are "totally unable" due to budget restraints to dig into their own pockets to finance development aid, he added.

The idea of an aviation tax, long urged by environmentalists and Germany's Green Party,moved to the forefront of the international agenda last week when Germany and France joined hands to back it. Kerosene is the high-powered fuel used by aeroplanes.

But it faces difficulties. German finance officials said the proposal has earned a cool response from the United Kingdom, which says it already faces high energy taxes.

Italy's finance minister Mr Domenico Siniscalco also said that G7 countries have a range of views on the issue.

"Many countries do not agree with a Tobin tax type of idea, on kerosene or whatever else," he said.

France had floated the idea of taxing international securities transactions, known as a Tobin tax, and Germany's leader had expressed interest. But it quickly lost steam when it was clear G7 officials were unlikely to rally around that plan.

The Tobin tax concept is named after US economist Mr James Tobin who proposed taxing foreign exchange transactions to discourage currency speculation.

Top industrial nations are searching for ways to fund their pledge of ridding Africa of poverty by 2015.

Under those so-called Millennium Development Goals, countries had promised to allocate 0.7 per cent of gross domestic product to development. But in the EU, only Denmark, Sweden, the Netherlands and Luxembourg have met that commitment.

Mr Juncker said budgetary problems in the rest of EU governments, which are struggling to contain fiscal deficits, make them "totally unable" to meet the aid goal.

"We would have to look for alternative modalities and ways and means of financing," he said.