Financement et devellopemen

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aNGOs Statement «on Innovative Sources of Financing for Development»

February 2006

The enlarged « quadripartite» group, that includes Algeria, Germany, Brazil, Chile, Spain and France, has been working since the beginning of 2004 on propositions for innovative development funding mechanisms, including international taxation mechanisms. . More than 100 countries signed on to the « New YorkDeclaration on Action against Hunger and Poverty », in September 2004 signalling initial support from the international community for the idea of launching such mechanisms.

In September 2005, 79 States supported the launching of a pilot mechanism in the form of a ‘solidarity contribution’ on plane tickets in a new statement titled the « Declaration on Innovative Sources of FinancingDevelopment ». France and Chile have already adopted a plane ticket tax, to be launched in 2006. The Paris conference on innovative mechanisms must be a new step in this process, by gathering together all the States which support this process.

In September 2005, a broad coalition of civil society organisations representing thousands of NGOs and citizens movement from all over the world called uponStates to join this initiative. They also demanded that certain conditions be fulfilled for the initiative to truly raise finance for development. On the occasion of the Paris conference, these organisations reiterate their call in the following statement :

1- Support to governmental initiatives in favour of international taxation

We take note of this intergovernmental initiative to implement apilot mechanism of international taxation for development funding. We welcome the involvement of Head of States and governments working on additional and innovative mechanisms, specifically on international taxes. This is because it would create a useful precedent, an essential step to launch and bring legitimacy to more ambitious taxation mechanisms of a universal scope.

Along with aconsiderable increase in Overseas development aid (ODA), debt cancellation, a revision of world trade rules and regulations, and the reform of International Financial Institutions, the implementing of international taxation mechanisms represents an important element to fund the MDGs. While generating new resources for development, it will also serve to improve the quality of the flows of internationalfunds. Currently, the volatility of the ODA undermines the efforts made by recipient countries to set up sustainable development strategies. Financial resources that are entirely concessional (grants), stable and predictable are essential to reach the MDGs.

Therefore, we call upon all the Heads of States and Governments to support this initiative, by endorsing the “Declaration on InnovativeSources of Financing Development” and to commit themselves to implement this pilot mechanism, in 2006.

2-Implementing genuine taxation mechanisms

However, the diplomatic strategy of the « quadripartite » group to rally a « critical mass » of countries to this initiative must not alter the proposed mechanisms. We are deeply concerned about the absence of fundamental principles in the declaration,without which this pilot mechanism can only very marginally contribute to the funding of the MDGs including :

- Resources should be raised by compulsory taxes and not voluntary contributions which negate the principle of an international taxation and prevent the new flows from being stable and predictable.
- The fixing of a taxation rate high enough to supply new and significant resources.
-The incremental nature of the tax (distinction between economy and business classes) must not be optional but compulsory to make the tax burden weigh as a priority on high income players.
- Stipulating the additional nature of the resources raised. They must not make the Northern States back away from their commitment to dedicate 0,7% of their GDP to ODA; instead, they must be considered as...
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