Oxfam to NZ Government: Fat Cat Tax is Coming, Better Be Ready

As reported today, the IMF has released a report to the G20 concluding that a package of taxes, including a levy and a “Financial Activities Tax” (FAT), would be the best way to repay the costs of the global economic crisis and to pay for crises to come. This IMF report has fatally undermined the argument that financial transaction taxes are impossible. It represents a major step forward for the growing movement around the world that supports a tax on financial transactions.

International development agency Oxfam is once again calling on the New Zealand Government to take a close look at such a tax on large financial transactions, which would make a miniscule dent in the profits of large banks and hedge funds, but which could raise hundreds of billions of dollars globally each year to deal with the economic crisis at home and help fight poverty and climate change abroad.

“In the budget to be announced next month, the Government is proposing to increase the burden on average New Zealanders by raising GST, but the Treasury still hasn’t done any modeling on a financial activities tax,” said Oxfam New Zealand’s Executive Director, Barry Coates. “A Fat Cat tax on banks is becoming a distinct reality and New Zealand should be ready and willing,” he added.

British Chancellor of the Exchequer, Alistair Darling sees a strong chance that a global levy on banks will be agreed soon. This comes on the back of recent support for a financial transaction tax, also sometimes referred to as a Tobin Tax, from the UK, Germany, France and a host of other countries, as well as banking regulators, finance experts and major investors.

The IMF has now given G20 leaders the go-ahead to tax banks and hedge funds. The FAT could be exactly the instrument needed to make the banks pay for the damage they’ve wreaked – the global economic crisis has plunged millions more people into poverty.

There is no doubt banks can afford to pay up. The global banking sector reported profits of $985 billion last year and Goldman Sachs is already filling this year’s bonus pot.

The IMF’s proposed taxes are a major step forward, but the report falls short on two counts. Firstly, the money that the IMF suggests this tax would raise is insufficient – $15 billion a year is not nearly enough compared to the pain the crisis has caused. Secondly, the report makes no commitment to ensuring money raised would be used to help poor countries and fight climate change.

A much bigger tax is needed, one that will raise funds for rich countries to start to repair their fiscal deficits and provide urgently needed funds to fight poverty and combat climate change.

“It sounds too good to be true – curbing excessive risk taking and speculation, and reducing the burden on hard pressed taxpayers, and tackling global problems. But it’s not. The IMF is not prone to wild enthusiasms and nor are the thousands of highly credible supporters of a FAT. It is time our Government woke up and got behind this important proposal,” Coates concluded.

ENDS

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