History Bank tax

1 history

1.1 g20 request imf
1.2 imf responds g20 request

1.2.1 1. financial stability contribution (fsc), or bank tax
1.2.2 2. financial activities tax (fat)
1.2.3 3. financial transaction tax

1.2.3.1 difference between bank tax , financial transaction tax

history

in context of financial crisis of 2007–08, in august 2009, british financial services authority chairman lord adair turner said in prospect magazine happy consider tax on banks prevent excessive bonus payments.

g20 request imf

at september 2009 g-20 pittsburgh summit, g20 nation leaders asked imf prepare report our next meeting regard range of options countries have adopted or considering how financial sector make fair , substantial contribution toward paying burdens associated government interventions repair banking system.

imf responds g20 request

when imf presented interim report g20 on april 16, 2010, laid out following 3 options. notice distinct each other:

1. financial stability contribution (fsc), or bank tax

financial stability contribution (fsc), or bank tax, or bank levy, – tax on financial institutions’ balance sheets (most on liabilities or possibly on assets) proceeds used create insurance fund bail them out in future crisis rather making taxpayers pay bailouts.

much of imf’s report devoted first option of levy on major financial institutions balance sheets. imposed @ flat rate , later refined institutions risky portfolios pay more took on fewer risks. such levy modeled on president obama’s proposed financial crisis responsibility fee raise us$90 billion on 10 years banks assets of more us$50 billion. if obama’s proposal approved congress, proceeds go general government revenues. used pay costs of current crisis rather go insurance fund in anticipation of next one.

2. financial activities tax (fat)

a financial activities tax or fat – raised on sum of bank profits , bankers’ remuneration packages proceeds going general government revenues.

3. financial transaction tax


a financial transactions tax (ftt) – on broad range of financial instruments including stocks, bonds, currencies , derivatives.

in november 2009, (two months after 2009 g-20 pittsburgh summit of heads of state), g20 nation finance ministers met in scotland address financial crisis of 2007–08. however, unwilling endorse german proposal financial transactions tax:

european union leaders urged international monetary fund on friday consider global tax on financial transactions in spite of opposition , doubts @ imf itself. in communiqué issued after two-day summit, eu’s 27 national leaders stopped short of making formal appeal introduction of so-called tobin tax made clear regarded potentially useful revenue-raising instrument.

while imf not endorse ftt, concedes ftt should not dismissed on grounds of administrative practicality.

the difference between bank tax , financial transaction tax

a bank tax ( bank levy ) distinct financial transaction tax in following way:

a financial transaction tax tax placed on specific type (or types) of financial transaction specific purpose (or purposes). term has been commonly associated financial sector, opposed consumption taxes paid consumers. however, not taxing of financial institutions themselves. instead, charged on specific transactions designated taxable. if institution never carries out taxable transaction, never taxed on transaction. furthermore, if carries out 1 such transaction, taxed 1 transaction. such, tax neither financial activities tax (fat), nor financial stability contribution (fsc) aka bank tax , example. clarification important in discussions using financial transaction tax tool selectively discourage excessive speculation without discouraging other activity (as keynes envisioned in 1936. )