Plans for global bank tax ‘dead’

The drive for a global punitive tax on the world’s largest banks ran into the sand Saturday as key G8 and G20 nations dismissed it as unwarranted.

A last-gasp European push for the levy appeared to fail as a clutch of developed and developing countries, led by G20 hosts Canada rejected universal rules.

“Three countries supported this idea,” a senior G20 official told AFP, “we are a year into the process and there are still three countries which support the idea.”

“The parrot is not sleeping, it is no more. It’s dead.”

Britain, France and Germany have argued the tax would help curb the type of excessive risk taking blamed for pushing the global economy to the brink, and build a nest egg to pay for future crises. But the idea ran up against fierce opposition from nations whose banking sectors avoided the worst of the crisis.

Canada, Australia and a host of emerging economies including Brazil, India and Mexico argued the levy would hurt institutions that had little to do with the crisis and would not prevent future meltdowns.

“The lessons of the crisis were that banks are under-capitalized, over-leveraged and under-regulated on the ground,” the G20 official said, adding the tax would not help.

Broader banking rules are expected to be discussed at a separate meeting of G20 leaders in South Korea later this year.

Canada’s top negotiator, Len Edwards, earlier said there was “no agreement for a global bank levy... countries are free to proceed as they wish.”

Germany and Britain are now expected to move ahead with domestic taxes, despite initial fears that it may make their banks less competitive.

US President Barack Obama is also pushing to impose a 80-billion-dollar domestic levy to recoup the costs of economic stimulus measures, which were put in place fend off economic depression.

Although the idea of a global tax is expected to be set aside, Canadian Prime Minister Stephen Harper was due to meet later Saturday with leaders of the expanded Group of 20 — which includes the G8 plus more leading and emerging economies — to hear different points of view on the tax. The International Monetary Fund will present proposals on the form a levy might take, but IMF officials indicated the ideas would be largely unchanged from a previously presented levy on profits and another on financial transactions.

“The idea is not impossible” said Mark Weisbrot, director of the Washington-based Center for Economic and Policy Research, but he said little had been done to support it.

There seems little appetite for a deal, even among countries that were broadly supportive of the idea, like the United States, he said.

“What are they doing to support it, are they making rabble-rousing speeches? That is what it would take given the power of the banking lobby.

“It is not just a question of standing up and calling for this, you would have to fight tooth and nail.”

AFP