Tags: EU | Europe | Bank | Tax

Germany, France, Britain to Slap Tax on Banks

Tuesday, 22 Jun 2010 09:33 AM

 

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Britain, France and Germany on Tuesday committed to levying a fee on banks to shield taxpayers from the cost of resolving financial crises and said they would ask other countries to join them.

The proposal comes ahead of this weekend's summit of Group of 20 leading nations, to be held in Toronto.

In a joint statement, the three countries say financial institutions should make "a fair and substantial contribution" to reimbursing governments for bailing out banks in the wake of the global economic crisis.

The countries said they were each proposing their own legislation, but that all would have the same goal.

"All three levies will aim to ensure that banks make a fair contribution to reflect the risks they pose to the financial system and wider economy, and to encourage banks to adjust their balance sheets to reduce this risk," read a proposal released by Berlin's Finance Ministry.

Germany declared its intention for such a tax in March and is drafting legislation to go to parliament before the summer recess, while British Treasury chief George Osborne announced its version on Tuesday. France said it will present the details of its bank tax in the coming budget.

In a speech before the House of Commons in London, Osborne said the British tax would be introduced in January 2011 and would apply to all British banks, building societies and British operations of overseas banks.

"Once fully in place, we expect the levy to generate over 2 billion pounds ($3 billion) of annual revenues," Osborne said.

The issue has proved divisive within the G-20, with the U.S. backing the European initiative, while others such as Canada and Australia — whose banks survived the global crisis intact — opposing it.

German Finance Minister Wolfgang Schaeuble has lobbied for the bank levy and has said that Europe will go ahead with it on its own, if no agreement can be reached at this weekend's summit.

"This will not be an easy discussion," a senior German Finance Ministry official said on Tuesday, noting the opposition of Canada, Australia and some emerging nations. He spoke on condition of anonymity in line with government policy.

German Chancellor Angela Merkel on Monday reiterated her support for the tax, and voiced cautious optimism ahead of the G-20.

"The more coordinated we proceed around the world, the better the results," she told journalists.

Germany unveiled an austerity package earlier this month with welfare cuts and new taxes worth 80 billion euros ($98.51 billion) until 2014. The figure already includes 6 billion euros from an unspecified banking tax, anticipating 2 billion euros a year starting 2012.

Osborne said in proposing the British bank tax that his nation had decided to go ahead with the move because London believed it was "not reasonable or fair" to wait until there is agreement on the issue from every country in the G-20.

The British Bankers' Association issued a statement Tuesday afternoon expressing support for the bank tax.

"The banks are committed to working with the government to ensure new bank levies balance tax raising objectives with the need to keep the recovery moving," the statement said.

However, the bankers' group also warned that the levy needs to apply to all banks operating in Britain regardless of their nationality.

"The U.K. is a trading nation and we must ensure bank taxes do not hurt our national interests or provide an unfair advantage for other businesses operating here," the statement said. "This levy is to apply to all major banks and building societies operating in the U.K., regardless of nationality."

The G-20 has been trying to come up with a new financial architecture to manage the global economy in the wake of the 2008 crisis.

Besides the bank tax, proposals include setting new standards on how much capital banks need to protect against a future financial crisis and establishing "financial safety nets" to help bolster countries such as South Korea, which have been vulnerable to the whims of traders who can send billions of dollars across borders at the press of a button.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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