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How a "Painless" Amount Can Change the World

Johanna Martinsson's picture

Depending on which country you live in, if you bought an airline ticket lately you may have saved a life without even knowing it. A number of countries have implemented a small airfare tax (also referred to as the “solidarity tax”) to raise funds to fight three of the world’s deadliest diseases: HIV/AIDS, Malaria, and Tuberculosis. In France, for example, air travelers pay an additional €1 in tax on domestic tickets and if in business class, €10. With aid falling, innovative finance mechanisms, such as microdonations, will be crucial in solving serious global problems. As quoted in a recent article in the Financial Times, Philippe Douste-Blazy, the man behind the airfare tax (also the former French Minister of Foreign Affairs), says that “certain sectors have benefited enormously from globalization: financial transactions, tourism and mobile phones. We need to tax an economic activity that’s only done by the rich, and tax it so lightly that nobody will notice.” He says the additional tax travelers pay is “absolutely painless!”

It’s interesting that governments have to intervene to make citizens donate such a “painless” amount; although, had the traveler been given the option to donate before purchasing a ticket, the chance of him/her doing so may not be so great. Questions will be asked such as: “Will this truly help the sick and poor?” “Is this a gimmick?” The minutes are ticking. In the end, the traveler just wants to buy the ticket. Trust and effort may be determining factors, even if the amount is “painlessly” small. The beauty of the airfare tax is that the customer doesn’t have to make any “tough” decisions, because the government has done it for us. The amount is small, barely noticeable, and can save lives.

Douste-Blazy’s idea of airfare tax came about in 2006 while on an airplane (ironically) with France’s President Chirac and Brazil’s President Lula discussing ways to increase western aid to developing countries. Their conversation resulted in UNITAID, an international drug purchasing agency, launched in 2006 by the governments of Brazil, Chile, France, Norway and the United Kingdom. UNITAID buys large volumes of lifesaving drugs on the cheap from pharmaceutical manufacturers, which brings the prices of drugs down, and encourages the medical industry to invest in research and development for better and new medicines with high-volume production. Through innovative spending, those in need are receiving better medicines, delivered faster and at lower cost.

From 2006 to 2011, UNITAID raised $2.2 billion, with 70% generated from the airfare tax. The agency’s website provides a detailed review of results as well as an interactive map with projects and the amount spent on medical products around the world. UNITAID supplies 93 countries with treatments and supports 8 out of 10 children on AIDS treatment globally.  Moreover, the agency has invested $200 million in Tuberculosis treatments and has distributed over 20 million quality bed nets have been distributed to prevent the spread of Malaria. (See UNITAID's Thank You Campaign)

Today, there are 29 countries contributing to UNITAID in the form of tax and regular donations. The following countries have implemented the airfare tax: Chile, France, Madagascar, Mauritius, Niger, and the Republic of Korea. Norway also contributes, but through parts of a different air tax. The following graphic shows the amount of tax applied in three countries and its contribution to saving lives.

Progress towards getting other countries to implement the tax seems a bit slow. In an interview with UNITAID’s Executive Director Denis Broun, talking about the potential of India joining, he says that arguments against the airfare tax are “absolutely bogus. It has no impact on government budgets, airline traffic or the economy.”  In the case of India, he points out that the airfare tax would be a win-win situation for the country.  First of all, Indian patients will benefit and since most of the drugs UNITAID buys are from the Indian pharmaceutical industry, it will go back into the economy.  While the Indian airline industry is suffering a high debt, the country has the fastest growing air passenger market with 61 million people travelling in 2011. Imagine if they implemented the tax!

So what’s next for UNITAID? While lobbying other countries to join the initiative, they are also pursuing an extension of the tax to financial transactions.  Just last month, 11 Euro zone countries agreed to implement a Financial Transaction Tax (FTT) as a way to protect governments and consumers from future financial crises. France implemented the FTT in August this year, and will commit a small percentage of the revenues from the tax to development. When addressing the UN General Assembly in September, French President Hollande praised UNITAID and called on other countries to implement innovative finance mechanisms, such as the FTT. He said, “This would be a beautiful example of what I call the globalization of solidarity.”
 
While “solidarity taxes” provide predictable and sustainable revenue streams for aid (and the health sector specifically through UNITAID), one can’t help but wonder if this will impact countries’ overall aid budgets, or aid to other development sectors.  Also, what about other global initiatives, will they be competing for funds? Nevertheless, UNITAID has proved that “painless” microdonations on the quiet are effective and is making an impact in fighting the world’s deadliest diseases. And what is truly fascinating is what the success of the method says about human beings and human behavior. I will explore this further in my next blog post.


Photo Credit: Salvatore Vuono/FreeDigitalPhotos.net
 

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Comments

Submitted by lawinsider on
Although I applaud the efforts to raise funds to combat deadly disease, I can't help but be skeptical by the notion of a "painless" tax. A painless tax used for good can provide a gateway for a painless tax that's profit minded. Let's just say that I'm not going to stop noticing the small taxes just because they did right with this one. I'm watching!

Submitted by Luc Lapointe on
Dear Johanna, I think the world agrees that with decreasing ODA, there is a need for finding new source of Innovative Financing. I think that for the sake of innovators around the world, it would be highly unfair to call a "tax" innovative. I think that within the Leading Group on Innovative Financing for Development, they also use "mandatory contribution. I have participated at a few of the meetings and it doesn't take much time to realize that there are a multitude of needs out there (i.e. health, education, nutrition, access to water, environment, poverty, housing, infrastructures, and the list go one). Which one of those other would also be able to tag another tax on airline tickets?!?! With one billion travelers soon...the potential is enormous but would we have a tax for each one of them? or just the one that lobby hard enough? What will we do with the "orphan" causes? Strangely enough, some people have noticed that the gap left by decreasing ODA is quickly being filled by an increase in Private Development Assistance (PDA). Directly contributing more than $58 billion to the needs of communities around the world as well as providing more than $3.6 billion in professional volunteer time, PDA is definitely more innovative and increases civic, individual, and corporate participation. As noted in a report by the Hudson Institute ".....“These connections, however, do not guarantee results. The challenge for intermediary organizations is that if philanthropically inclined individuals care more about the connection with an individual in need and less about demanding accountability, the success of the collective efforts of the institutional intermediaries is measured by volume of dollars, not necessarily by lives changed or needs met. Without having to produce evidence of change, the private institutional intermediaries could find themselves in jeopardy of becoming like the ODA, accomplishing few measurable results while squandering resources over long periods of time.” We are currently working on a global initiative to address the above mentioned recommendation. More than half the cost of an airline ticket is TAXES....I think it's time to be creative and truly harness the human potential to address the global needs with less government intervention. Governments should focus on creating the climate that will engage people in a meaningful ways outside of paying taxes. In a recent article by David Borstein, namely The Rise of the Social Entrepreneur, David points to the following program called LIFT. LIFT’s approach demonstrates how a human-oriented safety net system might work. Along the way, the student volunteers who pass through LIFT discover that they have surprising capacity to solve problems and help other people transform their lives; many say that the experience is life-changing. He concludes with the following inspiring comment -- Many of us have little idea of our own change-making potential. We may be in for a surprise. As Antoine de Saint-Exupéry wrote, “A single event can awaken within us a stranger totally unknown to us. To live is to be slowly born. Nice to read from a fellow Canadian in DC. Saludos cordiales.....Luc Lapointe

Dear Luc, Many thanks for sharing your thoughts. You’re asking some valid questions. It will be interesting to see how the “solidarity tax” evolves. Also, the global initiative you’re working on sounds interesting, look forward to learning more about it as it develops. Why people are reluctant to engage/donate is something I will try to explore in a follow-up post. Warm regards, Johanna

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