Why the UN’s Global Tax Proposal is a Dangerous Game

The United Nations raised a few eyebrows recently when it suggested taxing rich Muslims, football, and Uber as a way of bridging a shortfall in aid funding.

On a list of unconventional taxation ideas, this ranks right up there with the best of them. But we shouldn’t be too surprised by any of this. When it comes to questionable international bodies, the UN has few peers.

Far too many people focus only on the good the UN does. And, to be fair, there are plenty of examples where it does a lot of good. The UN’s work in helping lift global health standards in particular is commendable.

But we have to draw the line somewhere.

In proposing the idea of global taxes, the UN could be getting too big for its boots. It’s acting more like a government, and less like what is was designed for. The UN is supposed to promote international cooperation. It’s the platform through which nations conduct cooperative initiatives. It’s not a government. And it has no right wading in on tax related matters, let alone setting its own taxes.

But let’s say, for humour’s sake, the UN’s idea has merit.

How much would it need exactly? According to their estimates, the UN is about $21 billion short of its target. Apparently, nations are incapable of meeting the ever expanding needs of the UN. Here’s the UN, via the ABC, reminding us why that could never work:

In a new report, Too important to fail: Addressing the humanitarian financing gap, the nine [UN] panellists said despite rising global wealth, the ‘outdated’ aid system has been unable to meet all the world’s needs, including those stemming from financial crises, natural disasters and violent extremism.

The price tag for global UN aid efforts skyrocketed from $3 billion in 2000 to $35.7 billion last year, according to experts.’

In other words, donating money for aid is an outdated concept. What we need instead is something more progressive. Something like taking money from people whether they like it or not.

There was a time when aid used to be considered an act of charity. Apparently that’s not good enough these days. If the UN has any say in the matter, charity would look more like taxation, and less like donation.

And just to make sure we all understand how serious and dangerous it’d be to stick to the traditional model, the UN notes:

Last year, a funding shortfall forced UN agencies to cut food rations to 1.6 million Syrians living in refugee camps, a move now seen as having partly triggered the mass exodus of refugees to Europe.’

That’s what you might call the straw grabbing. If it could have, you suspect the UN would’ve put its funding gap right next alongside the actual Syrian War in terms of its influence on the refugee crisis.

Regardless of how noble the UN’s intentions may be, they’re worrying. The idea that the UN should have the authority to tax, in order to fund its operations, is a dangerous idea.

For one, it’d set a precedent for the internationalisation of taxes. You already pay local and national taxes. Taxes that, presumably, benefit you in some way. If not directly, then indirectly through other areas of the economy.

But what good are international taxes to you? They’ll never benefit you. Australians are already among the most generous in the world when it comes to charity. And considering how much we already get taxed, another layer is neither wanted, nor necessary.

Equally, this sets a precedent for the redistribution of wealth from rich to poor. Again, this is a responsibility governments should have, not transnational bodies.

Finally, you’ll have no idea where these taxes would end up. Any movement of money, outside the view of national scrutiny, lends itself to fraud and misconduct. Even if you supported such taxes, there’s no knowing whether they’d reach their intended target.

Uber, Muslims and football all part of the UN grand plan

Even more comical is how the UN proposes to bridge this $21 billion funding gap.

One of the ideas involves taking a cut on so called ‘mass volume’ transactions. An example of this might be purchasing an airline ticket. The UN would take a small cut of the ticket cost, and every cent would add up. With 3 billion passengers traipsing around the globe each year, the UN would be raking in the cash.

Yet even that sounds reasonable compared to some of its other suggestions.

The UN also proposed taxing FIFA, football’s world governing body. As a non-profit organisation, FIFA doesn’t pay taxes on anything it earns. But quite why a sporting body should get taxed for the UN’s benefit is less clear. If nothing else, it sums up the arbitrary, and desperate, nature of these proposals.

Elsewhere in this list of kooky ideas are levies on entertainment. For instance, that could include something like a taxi, Uber, ride.

An even more bizarre suggestion is what we could term the ‘Muslim tax’. Here’s the ABC explaining what this might look like in practice:

Another option proposed by the report is to tap into the billions generated annually in the Muslim world from alms-giving, or ‘zakat’.

Those donations amount to between $338 billion and $816 billion annually, according to Islamic Development Bank estimates quoted by the report. Just one percent of ‘zakat’ would make an enormous difference in global funding, it added.

The less said about this one, the better.

The worst idea, however, might be the so called ‘social impact bonds’. In essence, these are financial contracts. Through these bonds, you’d pay money directly to the UN to help fund their programs. In turn, the UN would offer you returns when ‘pre-agreed social outcomes were achieved’. Let’s just call it for what it is: investing in disaster.

You almost couldn’t make it up, but the UN has managed it. Once ‘pre-agreed social outcomes’ are ticked off, presumably you’d make a buck or two. How exactly one makes profit on a disaster is anyone’s guess. Do you wait around for a disaster hit region to recover before seeing any returns? You might be waiting a few decades in that case.

Ultimately, none of these proposals should ever see the light of day.

The UN must never be allowed to tax individuals or private organisations. If it does, we can start calling the UN for what it is: a global government.

Aid is charity, it’s not a requirement. People, and nations, should lend money where and when they can. You wouldn’t donate to charity if you had nothing to put on the table. Why should it be any different in this case?

The power to tax people is a responsibility beholden to governments. The UN isn’t a government, and we must never allow it to morph into one.

Mat Spasic,

Junior Analyst, Markets and Money

PS: Tax reform should remain the domain of national governments. Yet with or without the UN’s help, Australians face a future of higher taxes. If the government is to fix its budget deficit, and keep the economy from recession, taxes will have to rise.

But it may be all for naught. According to Markets and Money’s Vern Gowdie, we’re already standing on the edge of the next financial crisis.

Vern is the award-winning Founder of the Gowdie Letter and Gowdie Family Wealth advisory services. As one of Australia’s Top 50 financial planners, Vern believes there’s nothing we can do to stop what’s coming.

The stock market won’t be the only thing that crashes when the crisis hits. There’s another multibillion dollar market that’s poised to collapse when the credit bubble pops. We’ve had two such credit bubbles throughout history. This third, and latest, one has been building for the last 65 years. When it pops, it won’t be pretty.

The fallout of this impending crash could do serious harm to your wealth. Yet, with some preparation, you can protect yourself from the worst effects of the coming crisis. Vern shows you how to do this, and more, in his brand new report, ‘Global Financial Crisis 2016: 3 Crisis Scenarios, and How They’ll Impact Australia’. To get your free copy today, click here.

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

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