Sony Kapoor’s (2004) draft report ”The Currency Transaction Tax. Enhancing Financial Stability and Financing Development” is a well-written piece of advocacy, and in parts quite informative. The report also adds to the literature on the CTT at least in the sense that it emphasizes the significance of releasing central bank reserves for more useful and profitable purposes. “Brazil, for example, has about $50 billion of foreign exchange reserves that earn an interest income of about $1 billion every year. At the same time however, Brazil has dollar debts at an interest rate in excess of 13%. So this means that by holding these reserves, Brazil is losing 11% of $50 billion of $5.5 billion – more than 1% of its GDP – every year. (ibid., 25)

While making some good and, at times even original points, the draft report is highly problematic in many important regards. It presupposes the validity of orthodox economic theory, even if with some modifications and qualifications. Moreover, the report is written, first and foremost, to the New Labour government in the UK and the transnational business community, including representatives of banks and dealers. This sets definite limits to the discourse of the report and tends to make it alien to the aspirations of the both global civil society – including the ATTAC movement and other organisations participating in the World Social Forum – and many states.

Kapoor’s CTT proposal is about charity. The aim is to get the rich countries, and the UK in particular, to establish a tax on currency transactions which they can use also to give more money to ODA, on their own terms and subject to their assessment of the need. The report is uncritical about the existing practices of the ODA, assuming that it suffices to give money through the existing channels of bi- and multilateral aid, i.e. that ODA is the way to eradicate poverty. The report can also be argued to be politically rudimentary, if not naïve, in the sense that it contains no systematic analysis of the legal obstacles to, and political forces opposing, the CTT.

Kapoor’s report is not unique in its tendency to make the CTT to accord with the basic tenets of the neoliberal world order. There are alternatives, however. An alternative to the traditional forms of international “charity” is a multilaterally established and democratically controlled global tax. It should be fairly straightforward to establish a global CTT regime along the lines of the Draft Treaty (or any other similar proposal).

However, the main problem for the global CTT movement is now that the window of opportunity for realising the vision of the Draft Treaty may be closing. The transnational project of “new constitutionalism”, designed to disconnect economic policies from democratic accountability and will-formation, has already succeeded in securing the protection of absolute and excusive private property rights and the freedom of transnational traders and investors both in the EU and through the WTO. As long as the EU is structured around the principles of economic liberalism, and as long as taxation falls outside the community competence, the Europeans must consider whether a return to the original proposal of James Tobin might be, after all, preferable to the two-tier model that can be so easily defeated in the EU institutions. Globally, the CTT campaigners must sharpen their skills for legal argumentation in order to prepare to the foreseeable challenges in the WTO and, particularly, in terms of the GATS agreement.

For the full text, see: /Members/NIGD/rpctt.pdf

This paper will also be published in a book edited by Ville-Pekka Sorsa and…, entitled…, coming out in January 2005.