* Financial transaction tax proposal fails at G20
* France to still pursue tax through European Commission
* Political divisions prevent G20 from endorsing tax
By Lesley Wroughton
CANNES, France Nov 4 A proposal for a financial
transaction tax to raise new new funding for poor countries
failed to win the backing of the G20 although France President
Nicolas Sarkozy said he planned to still pursue the idea.
The tax proposal, formally made to the Group of 20 leading
economies by billionaire philanthropist Bill Gates, has faced
opposition from the start by countries such as the United
States, Britain and Canada worried about its added burden to
Germany was initially in favor but has turned lukewarm and
is contemplating what the proceeds of such a tax should be used
"I remain convinced (the tax) is possible ...that it's
indispensable financially given the crisis and that morally it
is absolutely necessary," Sarkozy told a news conference at the
end of the G20 leaders' summit.
An end-of-meeting G20 communique referred to the tax
proposal but failed to support it. "We acknowledge the
initiatives in some of our countries to tax the financial sector
for various purposes, including a financial transaction tax,
inter alia to support development," the communique stated.
"Unfortunately the clear political divisions that exist
around the concept (of an FTT) will prevent the G20 from
effectively acting on this topic," said Sam Worthington, chief
executive of InterAction, an alliance of U.S.-based development
groups who met with Sarkozy.
"Whether or not a coalition of individual countries will
take that step led by France is unclear and will to a large
extent depend on the political willingness of others to act as
well," Worthington told Reuters.
In a report to the G20, Gates proposed taxes on financial
transactions, aviation and shipping fuel, and tobacco as new
ways that countries could raise resources for poorer countries.
The Microsoft co-founder argued that even a small tax of 10
basis points on equities and 2 basis points on bonds could
generate about $48 billion from G20 member states, or $9 billion
if only adopted by larger European countries. A basis point is
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 routinely struggles to
overcome the hurdle that it is easy to avoid unless all
countries impose it.
Once a marginal idea, the global financial crisis has
brought the argument for the tax into the mainstream and
international development groups were disappointed that the G20
communique did not propose pursuing it.
"It is shameful that measures that could have helped pull
millions of people out of poverty and contribute to global
growth got ignored or paid lip service," said Luc Lampriere, a
spokesman for international aid charity Oxfam.
Development groups have strongly favored the tax because it
would provide significantly more money for development at a time
when rich donor nations are cutting foreign aid budgets.
"This summit will not yield an FTT but it will yield a
process whereby some countries may act and a clear and frank
support of the FTT by Bill Gates certainly helped advance this
cause," said InterAction's Worthington.
U.S. official said President Barack Obama discussed the
financial transactions tax with both Sarkozy and German
Chancellor Angela Merkel in Cannes on Thursday but the United
States remains wedded to its own approach to ensure American big
banks help pay for clearing up the 2009 financial crisis they
"The president made clear that he shares the objectives that
Chancellor Merkel and President Sarkozy have in ensuring that
the financial sector contributes an appropriate share to the
resolution of crisis," White House deputy national security
adviser Michael Froman told reporters.
"The administration has proposed one approach to that,
through the financial crisis responsibility fee. The Europeans
have another approach," Froman said.
Emerging economies such as Brazil and Argentina have also
cautiously favored a financial transaction tax to fund social
Brazilian President Dilma Rousseff said in Cannes she did
not oppose a global financial tax if there is consensus among
countries to bolster social investments.
There is concern among emerging and developing countries
that proceeds from a global financial transaction tax would go
toward to helping heavily-indebted euro zone countries and not