Global banking levy – RIP. I have consistently argued that no one should get too excited about the idea because it will not happen. And now it has been consigned to the dustbin of history.
The G20 communique is pretty vague about the execution:
“We agreed the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions, where they occur, to repair the banking system or fund resolution. To that end, recognizing that there is a range of policy approaches, we agreed to develop principles reflecting the need to protect taxpayers, reduce risks from the financial system, protect the flow of credit in good times and bad, taking into account individual country’s circumstances and options, and helping promote level playing field. The IMF will deliver their final report at the Toronto Summit.”
This is typical communique jargon announcing its death. The key line is: “taking into account individual country’s circumstances and options”. This means it is a policy free-for-all. That is certainly what Canada, Japan, Australia and the many other global tax dissenters think.
But it does not mean the end of banking levies. The US, UK and many European countries will still go ahead, though the taxes are likely to be small. And they have sufficient weight in the world economy to avoid big distortions from banks locating in light tax jurisdictions.
