* Microsoft's Gates says transaction tax can be done
* France hopes to win backing for tax in November
* Opposition to tax from U.S., Britain, Canada, China
(Adds details on outcome of G20 meeting, quotes)
By Lesley Wroughton and Daniel Flynn
WASHINGTON, Sept 23 Microsoft founder Bill
Gates on Friday backed a controversial financial transactions
tax to aid development in poor countries but France
acknowledged that most G20 countries did not like the idea.
The Gates Foundation was tasked by French President Nicolas
Sarkozy to examine ways the Group of 20 leading economies could
raise new money for the world's poor, including plugging an
estimated $80 billion to $100 billion funding gap to tackle
In a report presented to a meeting of G20 ministers in
Washington on Friday, the billionaire philanthropist proposed
taxing financial transactions, tobacco, and shipping and
aviation fuels, according to details of the report obtained by
With Western donors in Europe and the United States under
pressure to cut their budgets, and a euro zone sovereign debt
crisis escalating, developing nations are desperately seeking
new ways to lift themselves out of poverty.
Gates' point, according to a draft technical note on the
report, is that if African countries maintain current average
growth rates, their economies will double by early next decade
and GDP per capital will rise by more than 50 percent.
The Gates' report said a financial transaction tax could
raise "substantial resources" for developing countries. By some
estimates a financial transition tax could generate as much as
$250 billion if derivatives contracts were included.
But the report suggests even a small tax of 10 basis points
on equities and 2 basis points on bonds could bring in about
$48 billion from G20 member states, or $9 billion if only
adopted by larger European countries. A basis point is one
one-hundredth of a percentage point.
The levy, commonly dubbed a "Tobin tax" after the U.S.
economist who proposed the idea in the 1970s, has been mooted
at regular intervals to raise funds, but has always struggled
to get off the drawing board because it is easy to avoid unless
all countries impose it.
"Tonight nobody can say that such a tax on financial
transactions is not technically feasible," French Finance
Minister Francois Baroin told a news conference after a G20
meeting on development issues. "We are making progress on the
technical coherence of this project," he added.
The report will be presented to a G20 leaders' summit in
Cannes, France, in early November.
Countries such as Canada, Britain, the United States,
Australia and China oppose the tax because it puts more burden
on banks, while France, Germany, Austria, Belgium, Norway and
Spain support it, along with several African states.
"We are not oblivious to the debate and the doubts about
this," said Baroin, adding that France and Germany were
determined to push ahead with the tax despite opposition.
"We have the intention to implement this tax," he said.
TACKLING CLIMATE COSTS
International development group Oxfam welcomed France's
commitment and said the tax was on "the fast track to becoming
U.S.-based business groups on Friday voiced their concern
at growing calls for a financial transaction tax, saying they
had written to U.S. Treasury Secretary Timothy Geithner to
reiterate their opposition.
"A transaction tax will cycle through the entire U.S.
economy, harming both investors, and businesses," the group of
trade associations, including the influential U.S. Chamber of
Commerce, said in a statement.
The Gates report also said there was a "compelling case"
for all governments to tax tobacco heavily to reduce
consumption and generate revenue to meet health costs. It could
raise about $170 billion a year in G20 countries, it said.
It also backed World Bank and International Monetary Fund
proposals to tax shipping and aviation fuels, even though these
are politically hard to agree on and tough to design.
The G20 is also considering financing for infrastructure
projects in developing countries, which would boost growth in
nations that are often constrained by power shortages, lack of
roads and railways.
Friday's meeting of development and finance ministers
agreed to create an emergency food reserve in West Africa to
avert the risk of shortages in the world's poorest region.
French Cooperation Minister Henri de Raincourt said the
project, which would cost some $45 million, was a pilot
initiative and if successful would lead to the creation of
similar stockpiles elsewhere in the developing world.
(Editing by Chizu Nomiyama)