Facing financial downturn and dearth of development assistance by the donor agencies, the United Nations in its new report suggests an innovative idea to assist the poor countries in meeting their development goals by taxing billionaires across the world.

“A billionaire’s tax, would consist of a small tax of, say, 1 percent on individual wealth holdings of $1 billion or more with the revenue destined to finance internationally agreed global development purposes,” says the report titled ‘World Economic and Social Survey 2012: In Search of New Development Finance’ launched by the UN on Friday.

However, the report added that the formal proposal on taxing billionaires is yet in the international agenda. “The feasibility of these proposals depend mainly on securing the political agreement needed to implement them,” said the 29-page report. However, the UN has no taxing powers.

“The ‘average’ billionaire would own $3.7 billion after paying tax,” says the report. “If that billionaire spent $1,000 per day, it would take him or her over 10,000 years to spend all his or her wealth,” the report added.

According to an estimate, there are 425 billionaires in the United States, 315 in the Asia-Pacific region, 310 in Europe, 90 in other North and South American countries and 86 in Africa and the West Asia. Their combined worth is about $4.6 trillion dollars, according to the report.

The UN needs $400 billion to finance development needs. The lead author of the survey Rob Vos said, “Donor countries have fallen short of their aid commitments and development assistance declined last year because of budget cuts, increasing the shortfall to $167 billion.”

The report said that the UN is searching other fundraising potential like taxing on the emission on greenhouse gases, taxes on financial transaction and issuance of special drawing rights of the International Monetary Fund (IMF).

The proposal includes raising money on following counts:

•         A tax on carbon dioxide emissions in developed countries: a tax of $25 per tonne would raise an estimated $250 billion per year;

•         A tiny currency transaction tax of one half of a “basis point” (0.005 percent) on all trading in four major currencies (the dollar, euro, yen and pound sterling), which could yield an estimated $40 billion per year for international cooperation; 

•         Earmarking a portion of the proposed European Union financial transaction tax (which is expected to raise up to €55 billion or $71 billion per year) for international cooperation;

•         Regular allocations of IMF special drawing rights (SDRs) and use of “idle” SDRs could yield about $100 billion per year for the purchase of long-term assets which would then be used as development finance.

“Such taxes also make economic sense, as they help stimulate green growth and mitigate financial market instability. In short, such new financing mechanisms will help donor countries overcome their record of broken promises to their own benefit the world at large,” said Vos.

“The survey provides important suggestions to generate solid financial underpinnings for the actions to be undertaken in follow up to the agreement reached at the recent United Nations Rio+20 Conference to achieve global sustainable development,” according to Sha Zukang, under secretary general of the UN Department of Economic and Social Affairs.

Read the report