Markets, politicians react coolly to Chirac tax

Politicians and investors reacted coolly on Thursday to France's call for an international tax on financial market transactions to fight AIDS, saying the plan would be complicated, impractical and take too long to work.

While many agreed with President Jacques Chirac's position that more money was vital to fight poverty and disease, few were ready to directly back the plan he unveiled to the World Economic Forum in the Swiss ski resort of Davos on Wednesday.

"There are all sorts of different ways of doing things," was British Prime Minister Tony Blair's diplomatic, non-committal response to Chirac's plan to tax trades that amount to $3 trillion a day, which the French leader said would raise $10 billion a year.

"It is important to leave everything on the table and discuss it, but let's be clear what the overall purpose is. The overall purpose is to raise the aid commitment to Africa," said Blair, who has pledged Britain's presidency of the Group of Eight rich nations to fight poverty in Africa.

Microsoft Corp. founder Bill Gates was also doubtful, making the point with former U.S. president Bill Clinton at the gathering in Davos that it could take years to start working and divert attention from more urgent aid programmes.

"How long would it take to get this in place? Five years? Ten years? Between now and then millions of lives are at risk," said Gates, whose philanthropic foundation this week pledged $750 million to get life-saving vaccines to millions of children in poor countries.

Chirac said the tax, which he called the international solidarity levy, would not be an obstacle to the smooth functioning of markets, but financial market professionals were sceptical.

EFFICIENCY TAX

"As soon as you start taxing transactions you start affecting the functioning of the market and this is likely to be opposed by most market authorities," Ian Gunner, head of foreign exchange research at Mellon Bank in London said.

Andrea Lanzi, regional representative of the Paris-based ACI, an umbrella organisation for foreign exchange traders around the world, said a tax would damage the market.

"Every tax slows things down. The moment you tax an FX (foreign exchange) transaction people will think twice about making a transaction. Hedge funds and speculators will think twice. Trading volumes will go down," Lanzi said.

Chirac said the levy could be imposed on international financial transactions, fuel for air or sea transport, or take $1 from every airline ticket sold in the world.

George Soros, the billionaire fund manager and philanthropist, applauded the call to raise money but said it should be used as an opportunity to support the Global Fund to fight AIDS, tuberculosis and malaria - the brainchild of U.N. Secretary-General Kofi Annan.