A Financial Transaction Tax (FTT) could have a major positive impact on people's well-being and that of the planet, according to a new report by CIDDSE the international alliance of Catholic development agences. The report estimates that a FTT at 0.05% on financial transactions would raise €465bn. CIDSE advocates this money be used to tackle climate change issues. Social Justice Ireland has advocated for years for such a tax and proposed the income should be used to tackle poverty and climate change across the world with particular focus on achieving the Millennium Development Goals.

This report from CIDSE was issued ahead of meetings of EU Finance Ministers and an upcoming EU Impact Assessment of the FTT.

The fight against climate change is one of the global challenges governments continue to fail to stump up the money for. In decades of international climate negotiations money has proven an important stumbling block. Last December in Cancun, governments agreed to create a Green Climate Fund in the United Nations, which is to receive and distribute up to €70 billion (US$ 100 billion) a year from 2020, but nobody knows yet where this money is going to come from. In times of austerity, governments are reluctant about climate action weighing on their national budgets

There is no excuse for procrastination. The FTT is a credible mechanism by which to generate substantial amounts of money to help fill the climate fund and finance other global challenges, without requiring additional sacrifices from the taxpayer. 

In practice, the FTT would mainly impact short-term trading which has no added value for the real economy and contribute to the stabilisation of financial markets by reducing speculation. While it is widely acknowledged that the tax can be put in practice (including 2010 studies by the International Monetary Fund and the European Commission confirming its feasibility), the necessary political will is lacking. Countries like Germany, France, Belgium and Luxemburg are supportive, many others including the United Kingdom, the United States and the Netherlands are still unwilling to consider taxing financial transactions.

Those who oppose this proposal should realise that if the well-being of people and the planet are at risk, the future of the financial sector is too. The right thing to do now is to put people first, supporting the introduction of a Financial Transaction Tax for a better future.

Raising sufficient money is not enough, it will have to be administered and spent well to make a positive and lasting impact. Decades-long experience working with partners in the global south to bring about change has made this clear. Based on this experience CIDSE makes two recommendations:

• Cross-sector coordination must be an essential function of the mechanism allocating climate finance,because the fight against climate change covers several sectors of government activity including finance, agriculture, food security, water management, health, safety, and infrastructure.
• All climate funding must respect people's social and environmental rights, guaranteeing meaningful and effective consultation of local communities so that climate action does not take place at their expense.

If money is managed and spent well, taking the rights of the poorest into account, a major impact can be made on fighting climate change and reducing world poverty as well as achieving the Millennium Development Goals. The time has come for the financial sector to prove it can work for people and the planet.

The full text of the CIDSE report may be downloaded below

A fact sheet on Financial Transaction Tax prepared by CIDSE may be downloaded below.