World Social Forum, Mumbaï 2004

How to Finance Human Development Without Debt

28 January 2004 by Maria Lucia Fattorelli


First of all, I want to congratulate with the India people, who is hosting the Fourth World Social Forum, and thank Eric Toussaint for the invitation and the opportunity to participate on this important workshop.

Our main task in this IV World Social Forum is to build a great articulation between all our iniciatives, because we believe another world is possible and we will work for that.

What I bring here is a contribution of the UNAFISCO SINDICAL - Union of Tax Fiscals of the Brazilian Federal Government - to the debate about the possibility of a World of Justice and respect for all human beings, a world without debt.

We all know that the public indebtedness (as well as capital flight and unfair commerce) has prevented our countries from assuming there own destination of free nations, sovereign, that respects the human rights and guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). worthy life for all their children.

Besides discussing the indebteness process, I’ll talk about the tax policy as a mechanism of financing the State and promotion of the income distribution, economic growth and federative balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. , and also the urgent necessity to control the financial flows - whose extreme freedom has made possible operations of money laundering. Most part of the financial operations are artificial, because the estimated amount of US$300 trillion a year is much bigger than all the real economies of the whole world together.

What we are seing in our country is the continuous increase of the Brazilian tax burden - on an unjust and regressive form - and the engagement of the budget exclusively to the payment of the interests of the public debt, while the necessities of the Country and the most basic human rights of our people are not supplied by State.

We understand that the deep changes that need to occur in the tax policy, in the capitals flows and public indebtedness will depend on strongly claim of the society, from its conscientious mobilization. So, the importance of the information campaigns and the diverse initiatives of the alive force articulation of the national and international society, especially at the moment when the imperialism and the militarization advance on the countries of the Third World.

The social injustices is increasing, in Brazil and in many other countries.

The fiscal issue - what involves the collection of tributes and the application of the resources - has not been faced sufficiently, because the effective tributary model in Brazil has propitiated the concentration of income and preserved the privileges of the big capital, richnesses and inheritances, while it burdens the workers and consumers. In turn, the application of the resources increases the public debt payments, generating the lack of attendance to the basic necessities of the brazilian people.

The resources that lack in the hands of the State, necessary to the fulfilment of its function and to guarantee the social rights, overflow in the financial operations of money laundering, result of the corruption, tax evasion, contraband and other crimes. This way, there is not enought resources to atend the neccessity of education, health, work, housing, leisure, security, social welfare, protection to the maternity and infancy, assistance to the abandoned ones.

If we look to our Budget Report, we will find out that most of the resources are being destined to the payment of the high interests of the Debt.

The option commited with IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
, to generate 4,25% of primary surpluses in the public accounts is imposing severe cuts of investments and social public expenses, in one side, and a continuous increase of the tax burden, on the other side.

This policy is not being sufficient to control the debt, that keeps growing, but is causing a big damage in our country: There is no economy growth, the debt interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. payments are raising, the wages are falling, the unemployment is increasing, and the social problems, like misery, hunger and violence are getting deeper.

So, how can we develop a world without debt?

First we must get ready of this illegitimate and illegal debt of our countries. Than we must garantee that the political practices will be on the right direction, I mean, on the way of Justice and Ethic. And I think that will be possible only by the continuous and atent participation of the civil society. Governments can not act like if they received a “blank card” as we express in my country. We must do much pressure over our governments, so that they will assume a comitment with the people who has elected him and keep true to their campaign promisses.

If we not paying this higt amount of debt services, we could having a very different situation:
If we take some numbers of the public sector, we can imagine how much we could be investing in social policies:
- In 2001 we paid R$ 90 billion (US$30 billion);
- In 2002, we paid R$ 114 billion (US$38 billion) and
- In 2003, until november, we paid R$ 136 billion (US$45 billion).

That could be enough to finance programs in education, health, social security, assistance, to make land reform and so on.

If we watch our external debt, we will see that all we are receiving from our exportations [mostly commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. , with its low prices and still denied with the protecionism of the rich countries] is not sufficient to pay the interests and amortizations of our external debt, what make us dependent of new loans. The pressure of external debt payments and the insuficiency of exportations and reserves compared to external obligations produces an increasingly external vulnerability. Brasil has signed many agreements with IMF, who imposes its ajustment policies and the neoliberal reforms of the State (Public Pension; Tax Reform; Bankruptcies Law; Independence of the Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
; Labor and union, besides the avances in FTAA).

How to get out of these chains and march into our destination of free and rich country, predestined to abundance?

As I said before, we must question this process of indebtness, that is making our rich country poor. And for that, we are figthing very hard to have an auditing in our debt, as forseen in our Federal Constitution.

While the National Congress does not convoke the official auditing, a group of entities, including Unafisco Sindical, joined to promote an auditing, named Citizen Auditing, accurately due to being carried through by citizens and for the citizens.

With this movement of the Citizen Auditing of the Debt, we hope to create a permanent forum of discussion about the indebtedness process, rescuing facts, documents and proofs that demonstrate the illegitimacy of this process and also base the search of a concrete and viable alternative, in the direction to reduce the sum of this questionable debt.

We aim at, also, to make possible the construction of an articulation among indebted countries around the accomplishment of auditings, to search to bring up all the truth on the process that sacrifices our countries. From the collection of documents and facts that evidence the illegitimacy of this process, the indebted countries will be able to promote joint actions, in an organized and articulated way, that rescues the principles of Ethics and Justice that must rule the relations among all countries.

To finance the development we must have a Tax System as a distributive factor of the income, a Fair and inclusive pension system and a Financial system restricted to facilitate the means of production.

The market is like a god and dictates all that the countries must do. The financial institutions are the most priviledged sector of all economies around the world. In Brasil, they are paying less taxes every year.

10 Main Brazilian Private Banks - Variation of the main indicators

Item

1994

2001

Variation 1994-2001

Profit

R$ 3 bilhões /

US$ 1 billion

R$ 8,4 bilhões /

US$ 2,8 billion

180%

Liquid Patrimony

R$ 21,5 bilhões / US$ 7,17 billion

R$ 36,6 bilhões / US$ 12,2 billion

70%

Rentability

14%

23%

64%

Payed Taxes

R$ 2,6 bilhões /    0,87 billion

R$ 1,29 bilhões / US$   0,43 billion

-50%

Source: ABM Consulting

There is a narrow relation between the indebtedness process and the money laudering.

In Brasil, the necessity to attract foreign currency to close the external accounts - aggravated by the indebtedness process - makes government flexibily the rules that controls the flow of capitals to abroad and increase the domestic interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
.

The taxation has been reduced or even though extinct and financial controls have been abolished by Central Bank.
Impediments to the action of the fiscalization - secrecy bank law and restrictions to proceed investigations together with Public Prosecution Service.

Only a strong international articulation among councious entities and citizens will be able to pressure governments to make changes in the laws to start control capital flows. In Brasil we are starting a campaign claiming for this control and we think this IV WSF is also an oportunity to share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. this iniciative, specially in this moment that the imperialism advances even more over our countries.

We can finance development by a fair tax system. Many are the sugestions for that:
· extinguish the cumulative taxation;

· revoke the tax exemption of the “interests on the own capital” (US$1.1 billion/year);

· finish the exclusive taxation “on source” for the incomes of applications of fixed and changeable income and them capital profits. All the incomes must be submitted to the annual gradual table of the income tax;

· revoke the tax exemption of the profits and shares distributions and tax the profits remittances to abroad (US$ 2.2 billion/year);

· annual update of the income tax table;

· revise the deductions of the income tax, extending them, in order to adjust the tax due to real tax-paying ability of the citizens;

· tax exempt to the “existencial minimum” income;

· tax exempt to basic foods;

· recoup aliquot of 35% for the high incomes or accent the progressividade;

· increase the taxation on the agricultural patrimony;
· never grant tax amnesty;

· fortify the tributary administration;

· control the financial flow in fiscal paradises;

· join the public agencies to fight the money laudering;

· effectively fight against tax evasion;

· promote the fiscal education, to fortify the exercise of the citizenship in relation to the public finances.

In the international level, the Tobin Tax Tobin Tax A tax on exchange transactions (all transactions involving conversion of currency), originally proposed in 1972 by the US economist, James Tobin, as a means of stabilizing the international financial system. The idea was taken up by the association[ATTAC and other movements for an alternative globalization, including the CADTM. Their aim is to reduce financial speculation (which was of the order of 1,500 billion dollars a day in 2002) and redistribute the money raised by this tax to those who need it most. International speculators who spend their time changing dollars for yens, then for euros, then dollars again, etc., as they calculate which currency will appreciate and which depreciate, will have to pay a small tax, somewhere between 0.1% and 1%, on each transaction. According to ATTAC, this could raise 100 billion dollars on a global scale. Considered unrealistic by the ruling classes to justify their refusal to adopt it, the meticulous analyses of globalized finance carried out by ATTAC and others has, on the contrary, demonstrated how simple and appropriate such a tax would be.

ATTAC : https://www.attac.org/
, that potentially can make about 100 billion dollares of revenue/year, is able to finance the development. Some countries - like Belgium and France - have proposed its adoption to their Congress.

Other iniciatives, like sustenable development and solidary economy are also very important when we think of another possible world.

The impressive growth of the violence, of the unsheltered, of the abandoned children, and at last, of all species of social drama takes us to reflect on the reasons that had brought the humanity to this conjunctureof tremendous injustice and inequality deeper each time, between the people and the nations.

There is a lack of resources for the attendance to the basic human rights of the biggest part of the planet population, while barren richnesses are put into motion daily in operations of money laundering, fruit of corruption and of all species of crime.

It is necessary to fight for Justice and there are some ways to follow in this fight. One of them is remove the mask of the indebtedness processofthe ThirdWorld countries, greaters victims of the impoverishment and the unacceptable process of spoliation of its wealth.

The debt auditing is the instrument that will allow to raise all the truth on this process, and a procedure to be adopted together by the indebted countries, in articulated way, respecting the peculiarities of each country, but strenghtening the construction of a viable alternative, that effectively reduce the sum of the debts that we know illegal and illegitimate.

It is therefore and for that we fight for the Auditorship of the Debt!

To end this presentation, I want to mention a great journalist, Barbosa Lima Sobrinho, who died in 2000 at the age of 103 years when he was still working. On the last weeek of his life, he wrote an article about brazilian external debt. He used to say:

“When we carry through a fight, we must not be concerned with its results, but if it is a worthy fight we have the duty to fight for. I`m happy because I think that I fulfilled my duty."

In our opinion the fight against the debt is one of this fights we have the duty to fight for.

Thank you



Maria Lucia Fattorelli

member of the Committee and coordinator of the Brazilian Citizens’ Debt Audit Commission. Since the 4th April 2015 she is member of the Truth Committee on Public Debt.

Other articles in English by Maria Lucia Fattorelli (10)

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COMMITTEE FOR THE ABOLITION OF ILLEGITIMATE DEBT

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