Finns for a Flight Tax

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To finance the purchase of drugs to combat the main killer diseases in poor countries, France introduced a levy (an ‘international solidarity fee’) on air tickets back in 2006 (go here). Could Finland be next? 87 per cent of Finns back a levy of 1-4 euros on airtickets, according to KEPA, Finland’s service centre for development co-operation, as reported in Helsingin Sanomat. Among the young (15 to 24-year-old respondents) support is overwhelming: 93 per cent. KEPA reckons that this could generate 16 million euros a year – quite a modest sum, but then if every European country introduced the levy it would add up.

The airlines are hostile – they live on thin margins. But the levy is one euro per passenger when flying (economy class) within Europe and four euros on intercontinental flights. This will hardly deter most people from flying (less than the cost of the sandwich that a lot of airlines now charge for). The proposal has generated support elsewhere in Scandinavia (Norway, for instance).

The air ticket tax is one of the few proposals for innovative finance that has taken off (excuse the pun). The other is an International Finance Facility for child vaccination (IFFm) which originated with the UK’s HM Treasury (IFFm is a pilot for a much larger IFF that is designed to mobilize more aid through the sale of IFF bonds).

The pros and cons of the different innovative finance mechanisms – including the Tobin tax – were reviewed in a UNU-WIDER study undertaken for the UN General Assembly (go here). Interest in innovative finance waxes and wanes alongside traditional official (aid) flows and private capital flows – which are much larger (on development finance go here). Maybe next year’s meeting on a ‘New Bretton Woods’ (or whatever it is called) might make progress. In the meantime we have the UN’s Financing for Development meeting in Doha, 29 November to 2 December. More on Doha soon.


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