| Solidarity Levies to Fund Development Message from the Norwegian Presidency of the Leading Group Introduction: The relationship between ODA and innovative finance Norwaylong ago reached and surpassed the internationally agreed target of allocating 0.7 per cent of Gross National Income (GNI) to Official Development Assistance (ODA). We continue to hold the opinion that providing ODA through ordinary budgetary allocations is the most important means of mobilizing external finance for development. In view of the challenge of the Millennium Development Goals and the current gap between these goals and the financing available to reach them, Norwaynevertheless finds it imperative to help stimulate additional efforts, including through new and innovative mechanisms. Innovative finance can probably never replace “ODA as we know it”. Still, it can provide an important supplement, which should be tapped to its full potential. Therefore, in much the same fashion as we have been strong proponents and providers of traditional ODA, Norway would now like to promote new and innovative financing mechanisms for development. In our current capacity as Presidency of the Leading Group on Solidarity Levies to Fund Development, we find the new and re-invigorated international debate on such schemes very encouraging. Norwayinsists that the funds raised through new and innovative mechanisms, including a solidarity contribution on air transportation, be additional to existing ODA efforts from donor countries. After all, this is the sine qua nonof any new and innovative mechanism. We see such mechanisms as particularly relevant for donor countries struggling to increase their ODA in line with internationally agreed targets. That said, donor countries that have reached and surpassed such targets cannot rest on their laurels. They, too, should make an extra effort. Priority number one: The solidarity levy on aviation and UNITAID In December 2005 Norway offered its support to the French initiative on a solidarity contribution on plane tickets to help mobilize additional development finance for pursuing the MDGs. The decision to support an air transportation levy followed on the heels of Norway’s support to the International Finance Facility for Immunization (IFFIm), as proposed by the United Kingdom. Among a host of creative proposals to achieve increased, long-term, stable and predictable funding for development by means of internationally coordinated taxation, we believe the solidarity levy on plane tickets/travel holds much promise. It offers a unique opportunity to promote poverty reduction in developing countries and environmentally sustainable development in tandem. In addition, and as we expect will be demonstrated by France (having introduced its plane ticket solidarity levy on 1 July 2006) such levies can be easy to implement, their collection costs can be made minimal, national tax sovereignty need not be affected, and they need not affect competition between air carriers or international airports. Accordingly, such levies can be implemented without waiting for universal participation. Norway’s introduction of a new air transportation levy will depend upon increased international support for – and a more concrete political commitment to – the French initiative. Norwaystands ready to introduce a new levy provided we can mobilize a critical mass of countries, including key members of the European Union, to do likewise. For the time being, as for 2007, we will allocate a portion of our existing CO2 tax on aviation fuel (domestic flights only) as our solidarity contribution. As of now, 18 countries have either committed to – or communicated their clear intent to – introducing air ticket or other aviation levies for development purposes. Remarkably, many of these are developing countries themselves. In order for this initiative to assume increased credibility we need to see more industrial/donor countries offer their active support. We hope other supporters will come forward during our Presidency of the Leading Group. Mobilizing such support is our main priority. The funds mobilized through solidarity levies on aviation will be put to good use. In line with the proposal of France, the pooled proceeds will be used to combat hiv/aids, malaria and tuberculosis, through the new international drug purchase facility UNITAID. This facility, officially launched in New Yorkon 19 September 2006 and which will be hosted by the World Health Organization (WHO), is not just another new mechanism, not a fly-by-night scheme. It is an important pilot project, which we believe will demonstrate the virtues of pooling resources mobilized by way of innovative financing schemes. In 2007, Norwayintends to allocate at least USD 20 million to UNITAID, all of which will be part of a significant increase in our aid budget, and thus an additional contribution. This corresponds to a large portion of the proceeds from our CO2 tax on aviation fuel. We are committed to stay with UNITAID over the long haul. Other priorities: The environment, the UN and the Currency Transaction Tax For the time being, UNITAID is the sole agreed beneficiary of proceeds from solidarity levies on aviation. The purposes for which these proceeds should be pooled will be a matter of further discussion among the partners, as the number of partners increase. In this respect, we note the close link between air transportation and climate change, from which developing countries are often the first to suffer. In Norway’s opinion, the allocation of part of the proceeds from solidarity levies to alleviate and prevent environmental damage in developing countries should be discussed. The initiation of such a discussion will teke place during Norway’s presidency of the Leading Group.
Norway would prefer that as much as possible of the funds collected through a solidarity levy be pooled and disbursed through existing multilateral institutions that have a good track record in terms of achieving results. We believe UN organizations should be prioritized. In order to mobilize popular support for the air transportation levy, we believe priority should be given to clearly identifiable programs and purposes with a high degree of visibility, UNITAID being a prime example.
In a broader perspective, Norwaysees solidarity levies and other forms of innovative finance as a potential means of mobilizing increased, stable and predictable funding for the United Nations itself. As for the pursuit of other innovative financing schemes than the solidarity levy on aviation, Norwayfollows the debate on remittances and tax havens & capital flight with keen interest. Although it is not entirely clear how these themes fit in with the Leading Group’s agenda, these are important topics in the debate on Financing for Development (FFD). As a participant in IFFIm we look forward to its implementation this fall, the experiences of which could feed into future IFF pilots. We follow the debate on Advanced Market Commitments (AMCs) too, with interest. During our presidency we would also like to continue the discussion on a currency transaction tax (CTT) for development. “Post-Tobin tax” proposals with very low rates, yet nevertheless with a capacity to mobilize significant amounts of development finance, merit thorough pro et contra analysis. To stimulate the debate on the CTT is a final priority of ours. Main events: 5 December 2006 Work-shop and 6-7 February 2007 Conference As indicated during the final session of the Leading Group’s meeting in Brasilia on 6-7 July 2006, Norway intends to host two events during our Presidency. The first one will be a work-shop solely dedicated to two subject matters; the solidarity fee on aviation and the currency transaction tax for development (“CTT-dev”). The work-shop will be held in Oslo on Thursday 5 December 2006. Invitations will be sent to all Leading Group countries as well as to select academics, international institutions and NGOs, with the aim of attracting mainly medium- and technical-level participation. The second event will be a larger international conference (Plenary meeting of the Leading Group), to be held in Oslo on 6-7 February 2007, with high-level officials’ participation, alongside academics, representatives from international institutions and NGOs. We plan to start off with a plenary session on the solidarity levy on aviation, to be followed by a set of numerous roundtables on other subject matters of particular interest to the Leading Group. Invitations will follow later this fall. Royal Norwegian Ministry of Foreign Affairs
4 October 2006 | 
