Hey there, time traveller!
This article was published 20/4/2010 (2201 days ago), so information in it may no longer be current.
OTTAWA -- The International Monetary Fund is recommending all G20 countries slap a tax on financial institutions -- advice that puts the organization at odds with Canada, which has a rigid anti-tax position.
In a report leaked to the BBC and posted on the network's website, the IMF says G20 governments should tax banks and other financial institutions to make them pay for their own bailouts.
Governments would collect and manage the pool of rescue money, the IMF says. The tax would be relatively flat but over time shakier institutions would pay higher taxes.
The IMF was asked by the G20 to analyze options to steady the financial sector and make the banks shoulder the cost. The fund will present its findings officially Friday when finance ministers from the G20 meet in Washington, in preparation for the summit in Toronto in June.
Finance Minister Jim Flaherty and Prime Minister Stephen Harper have repeatedly spoken out against any kind of tax or levy on banks.
They argue, and did so again Tuesday, that Canada's banks prevailed during the global financial crisis because they were prudent and conservative. Therefore, they should not be penalized for their good behaviour by having to pay a new tax.
Ottawa has also argued creating a bailout pool just encourages banks to take bad risks, since they don't put their own survival on the line.
"No Canadian taxpayer money had to be put into our system" during the financial crisis, Flaherty said Tuesday. "We're looking at alternative forms of accomplishing the same goal" of financial stability.
Canada, as host of the next G20 summit, has significant sway over the agenda for financial-services reform. At the same time, Harper has spoken frequently about the need for all countries to work together in the interest of global stability, even if it means swallowing a policy that is not necessarily in the national interest.
His philosophy was meant to suggest China and the United States should adopt economic policies that will benefit global prosperity. But the new doctrine may come back to bite him.
Pressure is coming from all sides. Anti-poverty groups and non-governmental organizations around the world are banding together to encourage the G20 to adopt a so-called "Robin Hood" tax that would tax banks and give the money to the poor.
A national campaign was launched Tuesday in Ottawa, with advocates saying the federal government could collect at least $700 million a year by putting a very small tax on every trade of stocks, bonds, currency or derivatives. The proposal has taken on momentum around the world, gained currency in some key governments, and won the backing of some notable economists.
"Revenue from this tiny tax would come from one of the most profitable and undertaxed sectors of our economy: the banks and stockbrokers, who -- let's be frank -- can certainly afford it," said Mark Fried, policy co-ordinator for Oxfam Canada.
Proponents envision a small charge slapped on every financial transaction between financial institutions. It would target trading in currencies, stocks, derivatives and bonds. The tax would average about 0.05 per cent of the value of the transaction, or about 50 cents for every thousand dollars.
It would raise about $650 billion a year if the NGOs have their way. Half of that would go to domestic coffers. The other half would be split between aid for poor countries and mitigating climate change.
But the IMF was cool to the idea. Its report points out several flaws with a financial transaction tax.
"There may indeed be a case to supplement a levy of the kind described above with some other form of transaction, but... (it) does not appear well suited to the specific purposes set out in the mandate from the G20 leaders," the report says.
-- The Canadian Press