85 organizations from around the world challenged the IMF to report the truth in a paper they are preparing for the G20 on how the banks should compensate for the massive government bailouts they received. The groups signed a letter calling for the creation of a new financial transactions tax (or FTT), which would assess a modest tax on trades of stock, currency, options, and other derivatives. An FTT would perform two crucial objectives:

• raise billions in desperately needed revenue for investing in community priorities--globally and domestically--such as health, education, climate and economic stimulus
• curb the rampant speculation that helped create the current global financial crisis

At the 2009 Group of 20 (G-20) Summit in Pittsburgh, the G-20 charged the International Monetary Fund (IMF) with preparing a report on "the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.

Click here to download a PDF of the letter, or read the full letter below:

February 1, 2010

Dominique Strauss-Kahn

Managing Director

International Monetary Fund

700 19th Street, N.W.,

Washington, D.C. 20431

Re: IMF Request for external stakeholders’ views on the potential usefulness and impact of various approaches to financial sector taxation

Dear Mr. Strauss-Kahn:

We, the undersignedcivil society organizations are writing to you in response to the IMF’s request for views on the potential usefulness and impact of various approaches to financial sector taxation.

We believe that financial transactions taxes (FTTs) are an urgently needed tool for ensuring that the financial sector pays for the costs of government bailouts of their industry. FTTs can also help raise crucial additional funding for a range of priorities such as reducing budget deficits, contributing to economic stimulus, and paying for global public goods such as health care, education, and mitigating the impact of climate change. FTTs could also help rein in speculation in the financial industry that led to the economic crisis.

Evidence from economic research as well as real-world implementation indicate that, contrary to commonly received wisdom, FTTs are technically feasible to implement and that that they do not result in significant tax evasion or massive shrinkages of the market. We are aware of other proposals, such as the creation of a system of mandatory insurance by banks or the collection of an annual fee from banks that have benefitted the most from government bailout programs. Relative to the harm caused by the financial sector, these proposals unfortunately would not meet the G20’s threshold for generating a “fair or substantial contribution” toward paying for the burdens caused.

The IMF’s report to the G20 on this matter should include a substantial and accurate description of FTTs as a feasible and necessary tool, drawing on independent evidence from economists and academics who have examined the feasibility of such taxes, modeling a range of different rates and analyzing the technical feasibility and impact on different markets of unilateral implementation of such taxes. 

Finally, we urge the IMF to publish a draft version of its report so that full consideration of key viewpoints can be ensured—before finalization of the report.

We look forward to working with you on this importantmatter; please contact Asia Russell of Health GAP at asia@healthgap.org with any questions regarding this submission.

Sincerely,

http://www.imf.org/external/np/exr/consult/2009/index.htm

WWW www.healthgap.org

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info@healthgap.org