AlHijjah 8, 1432, Nov 4, 2011, SPA -- A proposal for a financial transaction tax to raise new new funding for poor countries failed to win the backing of the G20 although France President Nicolas Sarkozy said he planned to still pursue the idea, Reuters reported. The tax proposal, formally made to the Group of 20 leading economies by billionaire philanthropist Bill Gates, has faced opposition from the start by countries such as the United States, Britain and Canada worried about its added burden to their banks. Germany was initially in favor but has turned lukewarm and is contemplating what the proceeds of such a tax should be used for. An end-of-meeting G20 communique referred to the tax proposal but failed to support it. "We acknowledge the initiatives in some of our countries to tax the financial sector for various purposes, including a financial transaction tax, inter alia to support development," the communique stated. In a report to the G20, Gates proposed taxes on financial transactions, aviation and shipping fuel, and tobacco as new ways that countries could raise resources for poorer countries. The Microsoft co-founder argued that even a small tax of 10 basis points on equities and 2 basis points on bonds could generate about $48 billion from G20 member states, or $9 billion if only adopted by larger European countries. A basis point is one hundredth of a percentage point. The levy, commonly dubbed a "Tobin tax" after the U.S. economist who proposed the idea in the 1970s, has been mooted at regular intervals to raise funds but routinely struggles to overcome the hurdle that it is easy to avoid unless all countries impose it. Once a marginal idea, the global financial crisis has brought the argument for the tax into the mainstream and international development groups were disappointed that the G20 communique did not propose pursuing it. Development groups have strongly favored the tax because it would provide significantly more money for development at a time when rich donor nations are cutting foreign aid budgets. -- SPA
