The ‘solidarity tax’ debate


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Countries will be voting tomorrow on a ‘solidarity tax’ on airline tickets to generate increased revenues for development assistance. Guy Sebban of the ICC hates the idea:

The long and difficult road to ending poverty is potholed with well-meaning but misguided intentions. The latest do-good scheme, an airline tax to fund health care in the developing world, will not improve the lives of the poor. The tax will penalize the very people intended to profit from it and divert attention from proven methods of fighting poverty, such as lifting barriers to trade.

Larry Elliot of the Guardian is a fan – and sees no reason to stop there. He resurrects the idea of a tax on foreign exchange transactions as well. Thoughts?

Update: More background on aviation taxes for development and a development Tobin tax from Global Policy. The Tobin tax has of course been extensively debated. For example, see this BMZ report, this OECD Observer article, and this debate (1 & 2) in Finance & Development.

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Tim Worstall
February 28, 2006

If Larry Elliot’s in favour then all thinking people should oppose it.

Hypothecation of taxes is always a bad idea. The amount that you can raise from taxing one activity bears no relation whatsoever to how much it is desirable to spend on solving another problem.

So more money is raised for aid? Whoopee. As Bill Easterly and many others point out, it isn’t the lack of money that’s stopping anything. It’s the stupidity with thich it’s spent.