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UN Proposes Mechanisms to Raise $400 Billion to Close Gap on Development Financing Needs

“We at Ethical Markets support the Financial Transactions Tax  and Welcome this UN Initiative, Hazel Henderson, Editor  ”

New York, Jul  5 2012  1:05PM In a major  report, the United Nations today proposed a series of financial mechanisms to raise  $400 billion annually for development needs, as many donor countries have cut back their assistance funding due to the global economic crisis.

?Donor  countries have fallen well short of their aid commitments and development  assistance declined last year because of budget cuts,
increasing the shortfall  to $167 billion,? the lead author of the <em>World Economic and Social Survey 2012: In Search of New Development Finance</em>,
which contains the proposals, Rob Vos, said in a newsrelease.  ?Although  donors must meet their commitments, it is time to look for other ways to find  resources to finance development needs and address growing global challenges,  such as combating climate change,? he added. ?We are suggesting various ways to  tap resources through international mechanisms, such as coordinated taxes on  carbon emissions, air traffic, and financial and currency transactions.?

Produced by  the UN Department of Economic and Social Affairs (DESA), this year’?s issue of  the annual report on global development  found that development aid declined in  real terms in 2011, highlighting the need for additional and more predictable financing from new sources. The report notes  that while existing initiatives to fund programmes in the developing world have  been successful, the scope for scaling them up or replicating them is too  limited to meet the needs for developments financing in the next coming decades,  and new funding sources need to be tapped.

Some of the  new mechanisms to raise funds which were identified in the report include a tax  on carbon dioxide emissions in developed countries, a tiny currency transaction  tax, and earmarking a portion of the proposed European Union financial  transaction tax. These measures would yield substantial revenues of $250  billion, $40 billion and $71 billion per year, respectively, for international  cooperation.

?Such taxes  also make economic sense, as they help stimulate green growth and mitigate  financial market instability. In short, such new financing mechanisms will help  donor countries overcome their record of broken promises to benefit the world  at large,? said Mr. Vos, who serves as the Director of DESA?s Development  Policy and Analysis Division.

According  to DESA, a financial transaction tax (FTT) would also help to reduce the  profitability, and thus the volume, of computer-operated high-frequency trades,  which can be disruptive to equity markets. In addition, the tax would not be  felt by non-financial customers and would fall on a sector that is not heavily  taxed already.

?The FTT is  a progressive tax inasmuch as poor people engage in relatively few transaction  with financial institutions and the rich engage in many,? DESA states in briefing  note on the potential of FTTs. ?Financial and currency transaction taxes are  technically feasible and economically sensible. They could readily provide the  means of meeting global development financing needs.?

The World Economic and Social Survey 2012: In  Search of New Development Finance also notes that current financing  resources in many low-income countries have focused on allocating funds to  fight specific diseases such as HIV, tuberculosis and malaria, and that while  this has brought benefits for disease control, it has also contributed to the  fragmentation of health systems in these countries.

The report concludes  that it would be better to find new resources for a ?global fund for health?  which would support the improvement of countries? overall health systems.
For more details go to UN News Centre at http://www.un.org/news

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