Letter to Paul Martin Re: Tobin tax - April 30, 2002
Hon. Paul Martin, Minister of Finance
House of Commons
Centre Block, 309-S
April 30, 2002
Dear Mr. Martin,
On behalf of the Halifax Initiative, I write seeking clarification as to whether and why the Government of Canada no longer supports the Tobin tax. When questioned by Lorne Nystrom in the House, John McCallum, Secretary of State for Financial Institutions said that he "would commend the government for ceasing to support a Tobin tax because I think it is a pretty bad tax." (House of Commons Hansard, 21 March 2002).
The federal government voted overwhelmingly in support of the Tobin tax just three years ago. In March 1999, the House passed private member’s motion M-239, which stated: "that in the opinion of the House, the government should enact a tax on financial transactions in concert with the international community." The motion passed by a resounding 2:1 majority with all party support.
One hundred and sixteen of the 130 Liberals, including you, the Foreign Affairs Minister and the Minister for International Cooperation, who voted “yes” to that motion are still in the House. No subsequent motion or legislation has been passed countering M-239.
Governments around the world have recognized the systemic nature of financial crises and the need for a broad range of tools to combat them including the use of currency transactions taxes. In the past three years, the political debate on currency transactions taxes has advanced significantly. It is not the time to be rescinding support for the Tobin tax.
On November 19, 2001, The French National Assembly adopted, with the support of the Government, an amendment to the 2002 Finance Law that institutes a tax on transactions on the currency markets at a rate of between 0.01% and .1% that will be enforced when similar laws are adopted by other countries in the European Union. This is the first piece of legislation in the world that would implement a Tobin-type tax. Similar legislation is currently being considered in Belgium.
The German Development Minister just released a study on the feasibility of the currency transactions tax which refutes the main arguments against the Tobin-type tax and advocates implementation "by single OECD countries or - even better - within a group of countries, for example in the EU". A copy of the summary of this report is attached for your review and analysis. The full text can be found at http://www.wiwi.uni-frankfurt.de/professoren/spahn/tobintax/
The UN study on currency transactions taxes that Canada advocated at the World Social Summit in 2000 is expected in August of this year.
In the past, you have expressed your support for the tax in principle and as a means to generate revenue but remained skeptical of its feasibility and its impact on financial markets. In repeated attempts, we have been unable to engage your staff in rigorous debate on these “outstanding” issues. The Ministry of Finance has never refuted the argument by Rodney Schmidt, a former staff member, that “the Tobin tax is practicable if it is assessed on wholesale foreign-exchange payments as they are processed to settle foreign-exchange trades”, in fact, no one has. Thus, while claiming the tax unfeasible, your department refuses to engage in the necessary debate to prove their position. This is intellectually indefensible.
We call upon you to bring the currency transactions tax before the Finance or Foreign Affairs Committees in order to engage experts from around the world in an open and honest debate on key questions associated with the currency transactions tax. It was Ted McWhinney, speaking on behalf of the government, who invited “all members of the House to join in the committee studies of this aspect preparatory to raising it with renewed force and supporting empirical data before the G-7 and other arenas so that the efforts the finance minister has taken in previous years will have that extra strength behind them” (House of Commons Hansard, 23 March 1999).
We further call upon the Ministry of Finance to respond to the papers of Schmidt and others in writing so that the rationale for any scepticism is made clear to us. We welcome the opportunity to meet with your staff to discuss the papers further and to assist them in engaging the authors directly in the discussions. We further welcome the opportunity to meet with you and Mr. McCallum to provide a briefing on recent developments in the currency transactions tax debate.
Healthy open debate must be the cornerstone of policy development. We expect the Canadian government to explain Mr. McCallum’s comment and how a motion supported by an overwhelming majority of Parliamentarians does not result in a sustained effort to advance the issue at home and abroad. We look forward to a deepening of the dialogue on this critical issue.
John Mihevc, Chair, Halifax Initiative
cc: The Right Honourable Jean Chrétien, Prime Minister of Canada
Hon. Bill Graham, Minister, Minister of Foreign Affairs
Hon. Susan Whelan, Minister for International Cooperation
John McCallum, Secretary of State (International Financial Institutions)
116 Liberals, currently sitting, who supported Motion M-239 on the Tobin tax:
Adams Alcock Assad Augustine Bakopanos Barnes Beaumier Bélair Bélanger Bellemare Bennett Bertrand Bevilacqua Blondin-Andrew Bonin Bonwick Boudria Bradshaw Brown Byrne Caccia Calder Cannis Caplan Carroll Catterall Cauchon Chamberlain Charbonneau Collenette Comuzzi Cullen DeVillers Dhaliwal Dion Discepola Dromisky Drouin Easter Eggleton Finlay Fontana Fry Gallaway Godfrey Goodale Guarnieri Harvard Hubbard Ianno Jackson Jennings Jordan Karetak-Lindell Karygiannis Keyes Kilger (Stormont Dundas Charlottenburgh) Kilgour (Edmonton Southeast) Kraft Sloan Lee Leung Lincoln MacAulay Mahoney Malhi Maloney Marleau Martin (LaSalle Émard) McCormick McGuire McKay (Scarborough East) McLellan (Edmonton West) McTeague Myers Nault Normand O'Brien (Labrador) O'Brien (London Fanshawe) O'Reilly Pagtakhan Paradis Parrish Peric Peterson Pettigrew Phinney Pickard (Chatham Kent Essex) Pillitteri Provenzano Redman Reed Richardson Robillard Rock Saada Scott (Fredericton) Serré St. Denis Steckle Stewart (Brant) St-Julien Szabo Telegdi Thibeault Torsney Ur Valeri Vanclief Wappel Whelan Wilfert Wood