G-20 Shelves Global Bank Tax

by Mary Swire, Tax-News.com, Hong Kong

08 June 2010

As had been expected, the communiqué issued following the G20 meeting of finance ministers and central bank governors in South Korea on June 4 and 5 shelved any commitment to a global banking tax.

In the face of opposition to a multilateral banking levy already expressed by those countries, particularly Canada, whose banks had not caused the kind of problems seen in the US and in Europe, the communiqué concentrates instead on securing the economic recovery and addressing the future of financial regulation.

While agreeing that “the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions,” the communiqué ditches a global solution and recognizes that “there is a range of policy approaches”.

Instead, attendees 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 countries' circumstances and options, and help promote a level playing field.”

On the other hand, the G20 ministers affirmed their commitment to intensify their efforts and to accelerate international financial repair and reform. This included an undertaking to “reach agreement expeditiously on stronger capital and liquidity standards as the core of our reform agenda, and in that regard fully support the work of the Basel Committee on Banking Supervision and call on them to propose internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage and risk taking.”

They also “emphasized the need to reduce moral hazard associated with systemically important financial institutions,” and “committed to accelerate the implementation of strong measures to improve the transparency, regulation and supervision of hedge funds, credit rating agencies, compensation practices and OTC derivatives in an internationally consistent and non-discriminatory way.”

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