1,000 economists call for transaction tax
Thursday May 05 2011 | 06:41 AM

One thousand of the world's leading economists across 53 countries have appealed to G20 governments to support a global transaction tax on the financial sector.

In an open letter targeted at finance ministers as they arrived in Washington DC for a key G20 summit on Thursday, the scholars say the tax would act as a break on "excessive speculation".

They say the FTT, which has aroused industry opposition but garnered support among many EU politicians, would raise hundreds of billions of dollars each year if imposed at a "very low" 0.05 per cent rate.

"This tax is an idea that has come of age," write the 1,000 strong group, which includes Nobel prize winners Paul Krugman (pictured) and Joseph Stiglitz, as well as Jeffrey Sachs, an adviser to UN secretary general Ban Ki-moon.

"The financial crisis has shown us the dangers of unregulated finance, and the link between the financial sector and society has been broken.

"It is time to fix this link and for the financial sector to give something back to society."

The letter points to the example of the UK which it notes levies a tax on share transactions of 0.5 per cent "without unduly impacting on the competitiveness of the City of London".

The economists add the tax is both "technically feasible" given the automation of payments, but also "morally right". 

The group is apparently buoyed by the decision of French President Nicolas Sarkozy, who is chairing the G20 this year, to put the FTT high on the body's agenda.

The ministerial meeting in Washington DC today is seen as a key date in the run-up to a full leaders summit in November in Cannes. It also comes just a month after EU parliamentarians voted in favour of a resolution backing the FTT.

The letter, published in the UK Guardian newspaper, is co-addressed to Microsoft founder Bill Gates, who has been tasked by the G20 with finding new ways of financing international development.

The economists claim that an FTT could be used to raise funds for "global and domestic public goods" such as health, education and water and could be used to tackle climate change.