Rebate to developing countries for revenues internationally collected

Legal assistance paper

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Date produced: 07/10/2011

Are there any precedents for giving rebates to certain countries for revenues that have been collected internationally similar to the idea of making compensatory rebates to developing countries from revenues from a bunker fuel levy?

Summary:
There are very few examples of revenues collected under international authority and then allocated differently amongst the states actually collecting the revenue. However, there are a small number of such schemes in existence and another has been proposed, which may serve as instructive for the purposes of setting up a bunker fuel levy.

1. Deep Sea-Bed Mining under UNCLOS

The United Nations Convention on Law of the Sea (“UNCLOS”) contains provisions governing the mining of deep sea-bed resources (i.e. the “exploitation of non-living resources of the continental shelf” beyond 200 miles from any sovereign coastline). Under the relevant UNCLOS provisions, in return for the right to exploit deep sea-bed resources in areas more than 200 miles from any sovereign coastline, the exploiting nation is required to make payments or contributions in kind to the International Sea-Bed Authority (“ISA”), an independent organization charged with, among other duties, collecting and dispersing these revenues. The ISA is instructed under UNCLOS to distribute the collected revenues and contributions “to States Parties to [UNCLOS], on the basis of equitable sharing criteria, taking into account the interests and needs of developing States, particularly the least developed and the land-locked among them.” Additionally, certain developing states engaged in such mining are exempt from making the payments to the ISA.

As a practical matter, the deep sea-bed revenue sharing provision of UNCLOS is not well-tested. The ISA is operational, however due to technological and economic constraints, deep sea-bed mining has not been initiated on a large scale. Additionally, although the international community has largely signed and accepted UNCLOS, the United States is still not a signatory, citing the revenue sharing aspect as a significant impediment to the Unites States’ ratification of UNCLOS.

Viewing the UNCLOS deep sea-bed mining provisions as a potential precedent for a potential bunker fuel levy, the ISA and its authority under UNCLOS could provide an example of an operational, widely accepted mechanism whereby revenues are collected internationally and then distributed by an international authority. Moreover, the distribution of the revenue based on “equitable sharing criteria” in conjunction with the payment exemption for certain developing states creates a revenue distribution regime that, arguably, prioritizes the needs of developing states over developed states irrespective of the source of the revenues, in much the same way that many envision a bunker fuel levy operating.

2. UNITAID and the Airline “Solidarity Tax”

UNITAID is an organization that works to scale up access to treatment for HIV/AIDS, malaria and tuberculosis, primarily for people in low-income countries. It is a public-private venture that is hosted by the World Health Organization (“WHO”) and is governed by an executive board consisting of 12 nations. UNITAID receives 70% of its funding through a “solidarity tax” on airline tickets for flights departing from the participating country. Individual nations are able to structure the tax as desired. No country is required to impose the tax and the tax is only one of several means by which countries contribute to UNITAID. Currently nine of UNITAID’s 29 member nations have implemented this tax. This revenue is collected by the nation implementing the tax and turned over to UNITAID for use in its operations. At least 85% of UNITAID’s budget must be distributed to low-income countries.

UNITAID’s innovative financing structure is another precedent for a potential bunker fuel levy, as it imposes a fee on a certain activity, which is then provided to an international third-party organization for distribution, primarily to low-income countries. This structure, in principle, seems quite similar to what has been envisioned for the bunker fuel levy, especially given that the solidarity tax is also a tax on a means of transportation.

3. Financial Transactions Tax

Although not yet in existence, a tax on certain international financial transactions has been proposed to fund various programs or provide insurance to global financial markets. In its earliest form, these “Tobin taxes”, named for the economist who conceived of them, were proposed as a tax on foreign currency transactions. More recently, in the wake of the global financial crisis, a “financial transaction tax,” which would apply to certain international transactions undertaken by financial institutions has been proposed. While these proposals vary considerably in the details and structure of the tax, they all generally involve the tax being applied internationally and the resulting funds being administered and distributed by an international authority. Although the distribution schemes for the revenues derived from these fees are as varied as the number of proposals, some of the proposals have included the distribution of these funds to nations for development purposes. Given that any financial transactions tax will almost surely disproportionately fall on developed nations, a distribution scheme that provides development funds, conceptually, approaches the revenue and distribution scheme envisioned for a bunker fuel levy.