One can argue whether it is good or bad that some of the income for a goods tax would come from arms importing countries, most of which are in the Global South, and that only some of it would come from arms producers, which are predominantly in the Global North.

That is one reason why a country quasi- tax is an interesting alternative. In this case, it would be the exporting government who would be “taxed” – most likely by an international institution. Unless the exporting government decides to recover the tax from domestic arms exporting companies, such a country quasi-tax would have no effect on the price levels of arms exports. In consequence, there would be no effect on the demand for arms, nor on the level of arms imported. Importing countries would not contribute to the tax revenue. But there would also be no effect on the level of arms traded.

The lack of an effect on the quantity or arms trade implies that a country quasi tax would raise more revenue than a goods tax of similar percentage magnitude. It would therefore be preferable for maximizing income, but not if the objective was to reduce the level of arms traded.

I use the term “quasi-tax” as taxation in the proper sense is the prerogative of states: however, there are numerous examples of quasi-taxes in the form of membership assessments of international organisations or for international treaties. In many cases, these assessments are based on economic aggregates, such as national income. The World Trade Organisation’s members, for instance, have to pay according to their shares in international trade for the last five years for which data is available.

Taxing the arms trade could yield sizeable income. The financial volume of the arms trade can be estimated at about USD$100 billion per year, so even a comparatively small tax, say 10 per cent, could cover all of the costs of UN Peacekeeping (US $7,8 billion for fiscal year 2016-2017) with quite some money to spare. However, this would require all exporters to contribute. More realistic would be a voluntary scheme of governments willing to participate, resulting in lower income, and dedicated to less costly activities such as the UN Peacebuilding Fund (which has a very modest annual funding goal of US $100 million).

An extended version of this paper was presented at the 2017 Stockholm Forum on Peace and Development and will appear in the proceedings of this conference. For further technical detail please refer to this previous blog post on SIPRI’s website.