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CRS Reports on U.N. Funding/Global Tax Proposals

AUG. 29, 2000

CRS Reports on U.N. Funding/Global Tax Proposals

DATED AUG. 29, 2000
DOCUMENT ATTRIBUTES
  • Authors
    Browne, Marjorie Ann
    Reintsma, Mary
  • Institutional Authors
    Congressional Research Service
  • Subject Area/Tax Topics
  • Index Terms
    international taxation
    budget, federal, appropriations
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-23776 (6 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 179-33

                       CRS REPORT FOR CONGRESS

 

 

                    Received through the CRS Web

 

 

                 U.N. FUNDING: GLOBAL TAX PROPOSALS:

 

                         A BRIEF DISCUSSION

 

 

                Marjorie Ann Browne and Mary Reintsma

 

            Foreign Affairs, Defense, and Trade Division

 

 

SUMMARY

[1] The United Nations faces continued global challenges that have drawn it into a growing range of responsibilities. At the same time, U.N. member States, which authorize these operations, have withheld or delayed payments to the United Nations. This situation sometimes leads to a cash flow shortage for the organization. Among numerous proposals to address this predicament is the idea to impose new tax instruments, including international taxes suggested in January 1996 by then U.N. Secretary-General Boutros Boutros-Ghali. Some interpreted Boutros-Ghali's comments as implying that the United Nations should impose its own taxes in order to gain independence from the will of member States. His comments sparked a barrage of criticism. Congress enacted legislation prohibiting voluntary U.S. contributions to the United Nations if it attempts to impose taxes or fees on any U.S. person. Identical provisions were enacted for FY1997, FY 1998, FY 1999, and FY 2000 and are pending in the second session of the 106th Congress (H.R. 4811). In 1999, Congress also linked payment of U.N. arrears to certification that no U.N. tax or fee had been imposed on U.S. citizens, nor was it being promoted in the United Nations. In addition, Boutros-Ghali's remarks contributed to a growing lack of confidence in him as U.N. Secretary-General, one factor contributing to the U.S. decision not to support his bid for a second term in office. This report will be updated periodically. See related CRS Report RS20288, United Nations and Global Taxation: An Update of Proposals in 1999, by Marjorie Ann Browne.

U.N. FUNDING PROBLEMS

[2] U.N. expenses are outlined in its regular budget and adopted by the U.N. General Assembly, pursuant to Article 17 of the U.N. Charter. Each U.N. member State is obligated by the Charter to pay these expenses, as apportioned by the Assembly in its scale of assessments. According to U.N. financial regulations, payments to the U.N. regular budget and to other assessed accounts -- peacekeeping, for example -- are due within 30 days of receipt of the bill. Thus, payments for the U.N. regular budget are due in full by January 30 of each year. As of December 31, 1999, 124 of the 188 member States had paid in full their regular budget dues for calendar year 1999. Unpaid regular budget contributions totaled just over $244 million, as of December 31, 1999. As of August 14, 2000, 108 member States had paid all of their 2000 regular budget dues. As of July 31, 2000, unpaid regular budget dues totaled $744 million, including $518 million in current year (2000) assessments. 1 The failure of member States to fulfill their legal obligations has, from time to time, resulted in a cash flow shortage for the United Nations. 2

[3] It was in this context of a perpetual financial crisis facing the United Nations that then Secretary-General Boutros Boutros-Ghali, in the Cyril Foster Lecture at Oxford University on January 15, 1996, 3 and in a prior radio interview with the BBC, 4 urged member nations to consider a number of supplemental funding mechanisms, including an international tax.

PROPOSALS FOR SUPPLEMENTAL TAXES

[4] In his Oxford Lecture, Boutros-Ghali raised a series of options member countries could consider to improve the U.N.'s financial situation: a fee on speculative international financial transactions; a levy on fossil fuel use (or its resulting pollution); a small set-aside of the anticipated decline in world military expenditures-utilization of some resources released by the elimination of unnecessary subsidies; a stamp tax on international travel and travel documents; and a levy on global currency transactions. The Secretary-General did not advocate any particular measure, noting that "decisions are for the Member States to take". 5 He did remark, however, in the BBC interview that an advantage of generating revenues through a tax would be to give the United Nations some financial independence so that it was not "under the daily financial will of the Member States." 6

[5] Proposals for supplemental sources of income for the United Nations, including taxes, are not new. While the magnitude of the current crisis at the United Nations was unprecedented, the organization has experienced recurrent financial difficulties over its history. During this period, numerous proposals to address the funding problem have been made by academics, government leaders, U.N. commissions, and others. During the U.N. 50th anniversary celebrations in the fall of 1995, several world leaders argued that the U.N. financial crisis makes supplemental financing methods unavoidable.

[6] One of the earliest proposals, and one which is frequently revived, is a tax on foreign exchange transactions. This was originally recommended by Nobel prizewinner James Tobin of Yale University as a way to dampen speculation and market volatility. 7 Tobin noted that the tax could generate vast revenues which could be used for international development. A similar proposal, made by historian Professor Ruben Mendez, is to establish a computerized global Foreign Currency Exchange. 8 Even with extremely small fees or taxes, the revenue potential is extremely large due to the volume of transactions. Other proposals have included a tax on international trade commodities and a tax an exploitation of minerals on the ocean floor, both discussed in a Brookings Institution study. 9 Some have also suggested an international tax on stamps and airline travel-

U.S. REACTON

[7] Immediately following the comments by Secretary-General Boutros-Ghali, U.S. officials and Members of Congress issued sharp statements opposing the concept of an international tax. State Department press spokesman Nicholas Burns said on January 19, 1996, that the United States "does not support any form of worldwide tax to support the United Nations." He also noted that the United Nations has no authority to impose such a tax and that the United States would object to the organization seeking such authority. 10

[8] Lawmakers also strongly criticized the idea. Senators Dole, Helms, and Gregg announced January 22, 1996, that they had asked the General Accounting Office (GAO) to examine the "legal, financial, and policy implications of independent revenue-raising authority" by the United Nations. In its November 8, 1996, response, 11 the GAO made the following major findings:

     The United Nations receives only a small part of its financial

 

     support from private sources. U.N. operations are funded

 

     primarily from three sources: regular budget assessments,

 

     special assessments for peacekeeping missions, and voluntary

 

     contributions funded by member governments. * * * In addition,

 

     the United Nations has on two occasions borrowed funds from

 

     member states. 12

 

 

     Because the United Nations is an organization of sovereign

 

     states with no independent power of its own, it has no authority

 

     to impose taxes within the jurisdictions of its member states.

 

     Granting such authority would, at a minimum, require an

 

     amendment to the U.N. Charter. The official position of the

 

     U.S. government is that it would veto any proposal to amend the

 

     U.N. Charter for this purpose. In early 1996, the United States

 

     and 77 other countries said that they would consider only

 

     voluntary funding approaches for the United Nations. 13

 

 

     Alternative revenue-raising ideas have been solicited within the

 

     U.N. system. However, no formal proposals have been made. /14/,

 

     15

 

 

[9] Senators Dole and Helms (S. 1519) and Representative Solomon (H.R. 2867) introduced identical bills in the 104th Congress that would bar the United States from making any assessed or voluntary U.N. payments if the United Nations attempted to impose taxes or fees on any U.S. persons. The legislation would delay U.S. contributions until the President certified that such payments are not used to "develop, advocate, promote, or publicize" any proposal concerning taxation.

[10] As revised and enacted in an omnibus spending measure, Congress stipulated that no funds may be provided from the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997, for U.S. VOLUNTARY contributions to the United Nations, including the U.N. Development Program (UNDP), if the United Nations "implements or imposes any taxation on any U.S. national or corporation. Further, U.S. voluntary contributions to the United Nations, including the UNDP, may not be paid until the President certifies, 15 days in advance, that the United Nations "is not engaged in any effort to implement or impose any taxation . . . in order to raise revenue for the United Nations or any of its specialized agencies." 16 This provision has been enacted in each successive foreign Operations Appropriations Act (for FY 1998, FY 1999, and FY 2000). In the second session of the 106th Congress, both the House and Senate passed versions of H.R. 4811 for FY 2001 include an identical provision.

[11] Congress did not attach similar restrictions to assessed U.N. payments, as envisioned in the original Dole/Helms and Solomon bills. In late 1999, however, Congress passed legislation authorizing U.S. repayment of arrears on its assessed contributions to the U.N. regular budget and to U.N. peacekeeping operations accounts, after certain conditions had been certified. Among the conditions to be met was a requirement for certification that

     (B) No Taxes or Fees. -- . . . a tax or fee has not been imposed

 

     on any United States national by the United Nations or any of

 

     its specialized or affiliated agencies.

 

 

     (C) No Taxation Proposals. -- . . . neither the United Nations

 

     nor any of its specialized or affiliated agencies has, on or

 

     after October 1, 1996, officially approved any formal effort to

 

     develop, advocate, or promote any proposal concerning the

 

     imposition of a tax or fee on any United States national in

 

     order to raise revenue for the United Nations or any such

 

     agency. (113 Stat. 1501 A-479; Section 921(a)(3) of H.R. 3427 in

 

     Public Law 106-113, Appendix G)

 

 

ISSUES OF CONCERN

[12] INFRINGEMENT OF NATIONAL SOVEREIGNTY. The Secretary- General's January 1996 interview and lecture created a furor following press reports that Boutros-Ghali had urged the United Nations to consider imposing its own tax to become less dependent on the United States and other countries. Press articles noted that there are those who suspect that the United Nations aims to create an independent world government. 17 As noted by State Department officials, however, the United Nations does not, on its own, have any power or authority to impose such fees or taxes. U.N. member States, through the General Assembly, would have to adopt and open for signature and ratification, a treaty establishing taxes. Such a treaty would require Senate consideration and approval, and possibly congressional passage of implementing legislation before participation by the United States. Without such U.S. action, no U.N. tax could be levied on Americans.

[13] PERCEIVED INEFFICIENCY IN U.N. USE OF CURRENT RESOURCES. A related area of concern is the perceived inefficiency in resource use within the United Nations. Some U.N. critics believe the organization supports a bloated bureaucracy and is in need of further reforms before full funding should be provided, even for U.S. assessed contributions to the U.N. regular budget. U.N. supporters point to measures already taken to increase efficiency, including staff reductions in the Secretariat, curtailed travel and reduction of other expenses, and the establishment and six-year operation of an "inspector-general" for internal oversight. They further note that annual funding crises themselves lead to inefficiencies and render the organization less effective in carrying out its global mandate.

[14] IMPACT ON U.S.-U.N. RELATIONS. Congress and the executive branch have agreed to link U.S. payment of its U.N. regular budget and peacekeeping arrearages to progress by the United Nations on various reform measures. 18 State Department press spokesman Nicholas Burns (cited above, footnote 11) has emphasized that the United States believes that the best way to ensure adequate and predictable funding for the United Nations is through reforms which reduce U.N. operating costs, result in a fair system of financing for the United Nations, and which allow reinvestment of savings in areas of high priority to member States. This search for funding cuts and administrative reform continues under the new U.N. Secretary-General, Kofi Annan. Boutros Boutros-Ghali, who was seen, rightly or wrongly, as a proponent of a taxation option, was not reelected to a second term.

 

FOOTNOTES

 

 

1 Unpaid dues for peacekeeping operation accounts totaled over $1.48 billion, as of December 31, 1999. As of July 31, 2000, $3.06 billion was due for peacekeeping operation accounts.

2 For background information on financing the United Nations, see Cleveland, Harlan, Hazel Henderson and Inge Kaul, editors. "The United Nations at Fifty; Policy and Financing Alternatives." Futures, Vol. 27, No. 2, March 1995; and Stoessinger, John G. and Associates. Financing the United Nations System. Washington, D.C., Brookings Institution, 1964. (Esp. Chaps. 10-12.)

3 Boutros-Ghal, Boutros. Secretary-General, in Lecture at Oxford. Speaks of Globalization, Fragmentation and Consequent Responsibilities on U.N. To be delivered on January 15, 1996. United Nations Press Release SG/SM/5870/Rev.1.

4 B.B.C. Radio 4, "The Today Programme" interview with the Secretary-General, 6:45 p.m., Sunday January 14, 1996.

5 Op. Cit.

6 Op. Cit.

7 Tobin, James. "A Proposal for International Monetary Reform." Presidential Address to the Eastern Economic Association, published in Eastern Economic Journal, 4, 1978, cited in Felix, David. "The Tobin Tax Proposal. Background, Issues and Prospects." Futures, Vol. 27, No. 2, March 1995, pp. 195-208. See H.Con.Res. 301, 106th Congress, introduced April 11, 2000, which calls for U.S. leadership in supporting a Tobin-style tax on international currency transactions.

8 Mendez, Ruben. "Paying for Peace and Development." Foreign Policy, No. 100, Fall 1995, pp. 19-32.

9 Steinberg, Eleanor B. and Joseph A. Yeager. New Means of Financing International Needs. Washington D.C., Brookings Institution, 1978.

10 U.S. Department of State, Daily Press Briefing, Friday, January 19, 1996. Office of the Spokesman. Briefer: Nicholas Burns.

11 U. S. General Accounting Office. United Nations: Status of Alternative Revenue Raising Proposals. Report to Congressional Requesters. November 8, 1996. Washington, G.A.O., 1996. "GAO/NSIAD- 97-31"

12 This occurred, as authorized by the General Assembly, in 1947 (the U.N. Headquarters Loan from the United States) and in 1961 (U.N. bonds purchased by member States to fund peacekeeping costs). Congress authorized U.S. participation in each action.

13 The Security Council does not vote on Charter amendments. Article 108 of the U.N. Charter on Amendments does not require Security Council recommendation of a proposed amendment prior to its consideration by the General Assembly. Instead, after an amendment is adopted by a two-thirds vote of the Assembly, its entry into force requires ratification by two-thirds of the entire U.N. membership, including all five permanent Council members. The effect of that requirement might be considered the equivalent of a veto, but not as a formal Council vote.

14 Discussion in a July 1996 meeting of the U.N. Economic and Social Council on "new and innovative ideas for generating funds" dealt primarily with funding sources for development purposes. The resulting resolution (E/RES/1996/48, July 26, 1996) emphasized that new and innovative funding should be distinct from funding the U.N. regular budget and peacekeeping budgets and recognized that "the authority to levy taxes is the prerogative of sovereign States." This concept of "new and innovative ideas" is now on The agenda for a "high-level international intergovernmental event on financing for development" currently being planned for 2001.

15 These three paragraphs are from the above cited GAO report, p. 2. The footnotes to these paragraphs are added by the CRS author.

16 Foreign Operations Appropriation, 1997. Section 581. Restrictions on Voluntary Contributions to United Nations Agencies. In P.L. 104-208, Omnibus Consolidated Appropriations Act 1997.

17 See, for example, Toups, Catherine. "U.N. Considers Imposing Taxes," The Washington Times, January 16, 1996, P. A1.

18 For more information on linking U.S. arrears payments to U.N. reform, see CRS Report RS20262, U.N. Arrears: Legislation in the 106th Congress, by Vita Bite.

 

END OF FOOTNOTES
DOCUMENT ATTRIBUTES
  • Authors
    Browne, Marjorie Ann
    Reintsma, Mary
  • Institutional Authors
    Congressional Research Service
  • Subject Area/Tax Topics
  • Index Terms
    international taxation
    budget, federal, appropriations
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2000-23776 (6 original pages)
  • Tax Analysts Electronic Citation
    2000 TNT 179-33
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