Challenges and International Cooperation
Building a Global Consensus: Overcoming the Challenges of International Cooperation
Implementing a global tax, even for a cause as universal as the fight against climate change, is an undertaking of immense political and economic complexity. The success of such a project depends not only on its technical robustness but also on its ability to anticipate and overcome obstacles to international cooperation. The global FTT framework has been specifically designed by drawing on the lessons of the past and integrating innovative solutions to address the challenges of sovereignty, competition, and tax evasion. It represents a new form of "smart" international law that is proactive, adaptive, and incentive-driven.
Fiscal Sovereignty and Competition: Addressing the Political Challenges
Two main and legitimate objections consistently arise against any proposal for global taxation: the loss of fiscal sovereignty and the risk of unfair competition.
Fiscal Sovereignty: The power to levy taxes is one of the fundamental attributes of the nation-state. Governments are naturally reluctant to cede this power to a supranational entity. They fear losing control over revenue sources and seeing their economic policy flexibility reduced.
Competition and Capital Flight: Global financial centers are in intense competition to attract capital. The fear is that by imposing a tax, however small, a financial center will lose its competitiveness if others do not, leading to a flight of transactions and financial players to untaxed or less regulated jurisdictions.
Lessons from the Past: A Proven Design to Avoid Failures
The design of the global FTT has been informed by a rigorous analysis of past experiences to avoid repeating the same mistakes.
The Case of Sweden (1980s): The Swedish experience is a classic example of failure. An FTT implemented unilaterally, with too narrow a tax base, caused a massive relocation of transactions to London and generated revenues far below forecasts. The lesson is clear: an uncoordinated and poorly designed approach is doomed to fail.
The Case of France (2012): The French experience is more nuanced and instructive. Although the tax suffered from numerous exemptions that reduced its yield, it succeeded in achieving one of its key objectives: it caused a measurable shift in investments from the short term to the long term. It demonstrated that the mechanism can work to encourage "patient capital."
The proposed global FTT draws conclusions from both cases. It is designed to be applied on the broadest possible base and in a universal manner to avoid the Swedish problem, while capitalizing on the positive behavioral effect observed in France.
Solutions for Effective Global Cooperation
To overcome political obstacles, the project incorporates several mechanisms designed to make cooperation more attractive and effective.
An Inclusive UN Tax Body : By housing the project within a new UN department, a more inclusive and equitable governance framework is guaranteed compared to existing institutions like the OECD, where developing countries have often felt marginalized. This gives every nation a voice in the process.
Equitable Revenue Sharing as an Incentive : This is one of the keys to overcoming sovereignty-related reluctance. A significant share of the tax revenues will be redistributed directly to states, not based on the place of collection (which would favor large financial centers), but based on their real climate needs (assessed by vulnerability indices) and their decarbonization efforts. Each country thus has a direct and tangible financial interest in participating in the system, transforming a perceived obligation into a beneficial partnership.
Hybrid Voting for Efficiency : Within the strategic oversight body, the use of hybrid voting mechanisms (like qualified majority) allows crucial decisions to be made without being paralyzed by the requirement of unanimous consensus, which can be used by a single country or a small group to block any progress.
The "Future Universal Coverage" Clause and Anti-Evasion Measures
To ensure the system's sustainability and robustness in the face of financial innovation, legal and technical safeguards are planned.
The "Future Universal Coverage" Clause: This is a major legal innovation. The international treaty establishing the FTT will stipulate that the tax will apply automatically and uniformly to any new stock exchange, trading platform, or financial instrument that may be created in the future, anywhere in the world. This clause "future-proofs" the tax, preventing new evasion loopholes from being created to circumvent it. It sends a strong signal to the markets: there will be no escape.
Complementary Anti-Evasion Measures: The system will also rely on proven measures, such as the residence principle (the tax is due based on the operator's location, not the transaction's location) and the strengthening of existing mechanisms for automatic exchange of tax information between countries (like the CRS standard) for maximum transparency.
In conclusion, the collection of the Financial Transaction Tax is technically feasible without creating complex new infrastructure. For stocks and bonds, the collection can be automated by existing clearing houses. For derivatives, it can be integrated into their settlement processes or managed directly by financial institutions. Finally, for foreign exchange (Forex) transactions, the CLS international payment system offers an ideal centralized collection point, making the process efficient and universal. Technical feasibility is therefore not a major obstacle to the project's implementation.