Canada Rejects Bank Tax

by Mike Godfrey, Tax-News.com, Washington

19 March 2010

In interviews this week, Canadian Finance Minister, Jim Flaherty has reiterated his government’s opposition to introducing a financial services levy in Canada, saying that it would be a tax on investment, and would work against efforts to bring about economic recovery. Instead, Flaherty said G20 nations should tackle excessive leveraging through increased regulation and transparency.

“I think we need to go back and say what caused the crisis in the first place; look at what fundamentally was wrong. We know that there was excessive leverage in the system among G7 countries, we’re having leverage discussions now. We also want to have transparency,” he told Bloomberg. Asked about the prospect of the introduction of a financial services tax, Flaherty underscored that Canada would be “very opposed” to such a levy, stating: “We’re not in the business of raising taxes, we’re in the business of lower taxes and making Canada more attractive for investment, so that’s not something that we’d support.”

His remarks were made in response to comments made by UK Prime Minister, Gordon Brown, a strong advocate of a so-called ‘Tobin tax’, who recently said he was optimistic of a global consensus that would lead to the introduction of a banking-based tax.

The issue will be the focal point of July's G20 meeting in Toronto. Flaherty is expected to use this as an opportunity, as host, to dissuade the adoption of a financial services tax, stating that the introduction of such would be "a mistake". Flaherty told reporters:

“We're not going to impose capital taxes on our financial institutions. I hope to be able to convince my colleagues that it would be an unwise move.”

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