Should we feel sorry for the International Monetary Fund? Quite often the answer is yes. The Fund gets passed an international hot potato to write a report about because countries cannot agree; it then writes an equivocal report; and then gets it in the neck when – surprise, surprise – countries do not like the findings.

On the international tax on banks two of these three features apply. The Fund was asked by the Group of 20 to investigate how to make banks contribute to the taxpayer support they enjoyed when there was no consensus at all last September; and countries such as Canada and Japan hate the Fund’s report. But in this instance, the Fund did not write an equivocal report. The leadership of the IMF are fully signed up to the principle of an international tax on banks and have been staunch advocates of taxing banks for some time.

As the report says:

“Expecting taxpayers to support the sector during bad times while allowing owners, managers, and/or creditors of financial institutions to enjoy the full gains of good times misallocates resources and undermines long-term growth. The unfairness is not only objectionable, but may also jeopardize the political ability to provide needed government support to the financial sector in the future.”

The big question is whether a new tax on banks (or two new taxes as the IMF is proposing) will ever happen. Read more