Special taxes on banks are catching on – but moves around the world are disparate and show few signs of coordination so far, either in detail or in ambition.
- The US is planning a levy over the next few years to recoup the full cost of the Tarp bail-out fund. An administration official talked yesterday about a plan to get back taxpayers “investment in the financial industry”. As such it is a retrospective charge for services offered.
- The UK’s supertax on bankers’ bonuses was intended to curtail bonus payments in the run-up to an extremely difficult election for the Labour government. As an attempt to change incentives, it seems to have failed, with banks suggesting they will still pay bonuses, thereby allowing the UK to tax foreigners with the risk that banking operations move away from London.
- France is implementing a similar 50 per cent tax on traders’ bonuses, and Christine Largarde, the French finance minister, said she expects the tax to raise more than initially expected.
- Other countries, such as Switzerland, have rejected any levies on banks or bonuses.
- The International Monetary Fund has the job of trying to reconcile these different approaches. John Lipsky, the first deputy managing director, recently argued that no country believes the measures so far are anything other than one-offs and not a “substitute for the more fundamental reforms needed to help avoid future crises”. He makes the point that it is important to distinguish between levies that address the costs of taxpayer support and those designed to charge for the implicit insurance offered by governments in future. In an understatement, he says, “the entire reform effort won’t be either quick or easy”. The next installment in the process will be an IMF report at the Spring meetings.
In all of this, the big effort globally is to ensure banks have greater buffers against failure (higher capital) and that the authorities work to getin tinto a position where bad banks can fail (to minimise the implicit state insurance), but also to get banks to pay for the residual insurance that taxpayers are likely to provide for future systemic crises.
