Bank tax plan puts IMF at odds with Canada

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.

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.

If countries still feel the need to raise more money from the financial sector, they should tax the profits and remuneration of financial institutions, the report says.

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.

“International co-operation would be beneficial, particularly in the context of cross-border financial institutions,” the IMF says.

“Countries’ experiences in the recent crisis differ widely and so do their priorities as they emerge from it,” says the report.

“But none is immune from the risk of a future — and inevitably global — financial crisis.”

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 bail-out 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.

When Harper launched his G20 summit platform in Davos, Switzerland, in January, he spoke of “enlightened sovereignty” as a way for the world to work together.

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.

“We pay our taxes so all Canadians can have quality public services. Why shouldn’t the big banks chip in their share?”

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.

Globally, the tax is small enough to spare financial institutions harm, but would discourage the kind of speculative trading that was partly behind the global crisis, advocates say.

But the IMF concluded that there is no proof it would work that way.

The federal Conservatives want none of the taxation options, preferring tougher standards for bank liquidity and capital ratios to stabilize weak financial institutions.

Flaherty has also proposed a “contingent capital” fund that would see banks in trouble turn bonds into equity during times of crisis.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Education Minister Adriana LaGrange says she has not received an official request from any other school board for a similar move to online learning. (Advocate file photo)
’Operational pressures:’ Calgary schools shift to at-home learning for grades 7 to 12

School boards can ask to move online for a number of reasons

Russian President Vladimir Putin visits the Coordination Center of the Russian Government in Moscow, Russia, Tuesday, April 13, 2021. The centre was set up as a line of communication with the whole of Russia for analysing and collecting information, promptly using big data and solving arising problems. (Mikhail Metzel, Sputnik, Kremlin Pool Photo via AP)
Months after hack, US poised to announce sanctions on Russia

First retaliatory action against the Kremlin for last year’s hack

opinion
Opinion: Waiting 4 months between vaccine doses too long

“It’s not just a matter of potency, it’s a matter of the… Continue reading

Richie Laryea of Toronto FC, left, and Jean Meneses of Mexico's Leon battle for the ball during a CONCACAF Champions League soccer match in Leon, Mexico, in Leon, Wednesday, April 7, 2021. Toronto FC hosts Club Leon in the second leg of their Scotiabank CONCACAF Champions League round-of-16 tie holding a valuable away goal after a 1-1 draw last week in Mexico. THE CANADIAN PRESS/AP/Mario Armas
Injury-riddled Toronto FC dispatches Club Leon in CONCACAF Champions League play

Injury-riddled Toronto FC dispatches Club Leon in CONCACAF Champions League play

Winnipeg Jets' Dylan DeMelo (2) skates the puck around Ottawa Senators' Thomas Chabot (72) as he holds off Winnipeg Jets' Mason Appleton (22) during first-period NHL action in Ottawa on Wednesday, April 14, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Winnipeg Jets score two third-period goals to secure 3-2 victory over Ottawa Senators

Winnipeg Jets score two third-period goals to secure 3-2 victory over Ottawa Senators

Toronto Raptors forward Chris Boucher (25) shoots over San Antonio Spurs forward Keldon Johnson (3) during the first half of an NBA basketball game Wednesday, April 14, 2021, in Tampa, Fla. (AP Photo/Chris O'Meara)
Anunoby, Siakam rally Raptors past Spurs 117-112

Anunoby, Siakam rally Raptors past Spurs 117-112

John Furlong pitches a broader B.C. bid for 2030 Winter Games

John Furlong pitches a broader B.C. bid for 2030 Winter Games

New York Yankees starting pitcher Corey Kluber throws against the Toronto Blue Jays during the first inning of a baseball game Wednesday, April 14, 2021, in Dunedin, Fla. (AP Photo/Mike Carlson)
Bichette hits 2nd homer in 9th, Blue Jays beat Yankees 5-4

Bichette hits 2nd homer in 9th, Blue Jays beat Yankees 5-4

Oklahoma City Thunder forward Luguentz Dort (5) goes to the basket as Utah Jazz forward Jarrell Brantley (5) defends during the second half of an NBA basketball game Tuesday, April 13, 2021, in Salt Lake City. THE CANADIAN PRESS/AP, Rick Bowmer
Undrafted Montreal native Dort continues to smash “glass ceilings” in NBA

Undrafted Montreal native Dort continues to smash “glass ceilings” in NBA

A man wearing a protective mask to help curb the spread of the coronavirus walks past banners for the Tokyo 2020 Olympic and Paralympic Games in Tokyo, Wednesday, April 14, 2021, to mark 100 days before the start of the Summer Games. THE CANADIAN PRESS/AP, Eugene Hoshiko
Rings on the Horizon: Tokyo Summer Olympics hit 100 days out marker

Rings on the Horizon: Tokyo Summer Olympics hit 100 days out marker

Most Read