World Is Warming To Financial Levy, Claims Brown

by Robert Lee, Tax-News.com, London

27 January 2010

British Prime Minister Gordon Brown has said that the idea of imposing some form of global "Tobin tax" on the international financial industry is gaining traction, despite initial hostility to the idea from the United States in the wake of the financial crisis.

Brown told a regular Downing Street press conference on January 25 that the recently announced plans by the Obama administration in the US for a "Financial Crisis Responsibility Fee" to recoup taxpayer money spent on the banking sector bail-out meant that the US in general was warming to the idea of a banking "insurance levy" to help blunt the impact of any future banking crisis on public finances.

Brown surprised delegates at the Group of Twenty (G20) meeting in Scotland last November by advocating a global transaction tax on banks, a proposal which was immediately dismissed by US Treasury Secretary Tim Geithner. However, the Prime Minister told reporters that "as a result of the announcement (by Obama and Geithner) about their levy on wholesale lending, I think the proposals that I made at St Andrews for an international levy – the ones that I made that were controversial at the time – are now gaining currency around the world."

"I think you will probably see further moves to get an international agreement about some international levy to deal with, if you like, the responsibility that the banks owe to society, which is not met fully by the current arrangements," Brown added.

While there is much support for a global Tobin tax within the member states of the European union – France being a particularly strong advocate – opponents point to the myriad and complex nature of financial transactions now in the global marketplace, and to their fast-changing nature, arguing that this makes such a tax impossible to achieve in practice.

Earlier in the month, the International Monetary Fund (IMF), announced the launch of a comprehensive consultation as part of the compilation of its report on proposals to recover public money that was used to support banks in the current financial crisis. Amongst the topics up for discussion is the idea of a financial sector tax.

The IMF report was commissioned by the G20 countries to analyze policy options “for how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions."

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