Apr 2010 27

Dispute Over the Global Bank Tax

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Finance Minister Jim Flaherty did not give up the fight with the International Monetary Fund over the organization?s proposal for a global bank tax to guard against future financial meltdowns and called the plan 'odd' and senseless for Canada.

Mark Carney, the Bank of Canada governor, said Thursday the debate over a global bank tax has become a 'distraction' from the core reform agenda. He entirely endorses the view from Finance Minister Jim Flaherty, who has consistently opposed the bank levy, and indicated he?s worked closely with Canada?s chief banking supervisor, Julie Dickson, in developing an alternative proposal to the bank tax for the G20 to consider.

Canada has led the fight against a global bank tax, which is strongly encouraged by the big European economies. Ottawa?s position has been that Canadian banks should not be subject to a global tax, as they got through the financial crisis relatively undamaged and didn?t require direct government help to keep them alive.

This week, the International Monetary Fund recommended a two-pronged tax, on both bank liabilities, and earnings and compensation. The IMF proposal envisages two taxes: one would be paid into a bailout fund and the other would be a Financial Activities Tax which would be levied on the sum of the profits and remuneration of financial institutions.

Canada?s finance minister and central bank governor will join their counterparts from the Group of 20 leading developed and developing nations in Washington on Friday at a meeting that will focus on financial reforms.

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