Tags: IMF | Global | Bank | Tax

IMF Calls for Global Bank Tax

Wednesday, 21 Apr 2010 09:44 AM

By Dan Weil

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The International Monetary Fund says that banks should pay a special tax on their profit and compensation to finance any future bailouts that are needed in Group-of-20 nations.

In a preliminary report to the G-20, the IMF also recommends that banks pay a tax on their liabilities, outside of deposits.

“Measures that impose new costs on financial institutions will need to reflect and be coordinated with regulatory changes under consideration,” the report says, according to Bloomberg.

G-20 governments are considering plans to charge banks more in taxes after the governments and central banks bailed them out to the tune of about $11 trillion.

The cost of direct government support to the financial system, excluding funds that have been repaid, has averaged 2.7 percent of GDP for advanced G-20 economies, according to the IMF.

The crisis will send public debt in those economies soaring by almost 40 percentage points of GDP in five years compared to 2008, the IMF predicts.

Coming after the Securities and Exchange Commission charged Goldman Sachs with fraud, the bank tax idea is gaining supporters.

The United Kingdom and France already have implemented a tax on bank bonuses.

“These are important proposals,” U.K. Chancellor of the Exchequer Alistair Darling said in a statement. “The recognition that banks should make a contribution to the society in which they operate is right” and “any agreement has to be international.”

The allegations against Goldman Sachs may galvanize a bipartisan effort to pass financial reform in the United States.

On Tuesday, Senate Minority Leader Mitch McConnell said on the Senate floor that he is "heartened to hear that bipartisan talks have resumed in earnest," CBSNews.com reports.

At a later meeting with reporters, he said that while some problems remain in the proposed bill, "I'm convinced now there is a new element of seriousness attached to this, rather than just trying to score political points. … I think that's a good sign."

Democrats also reported progress in negotiations.

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