Three of Europe’s biggest economies have thrust the bank levy debate back on to the global agenda despite Canada’s best efforts to kill it, a move that threatens a showdown at the Group of 20 summit.
The effort to slap an additional tax on banks picked up momentum on Tuesday when the British government’s emergency budget announced its intention to proceed with such a move – worth £2-billion ($3-billion) a year – and France and Germany announced similar proposals.
The issue promises to be a divisive one at the summit this week given the European alliance and the heated opposition to such a levy by countries such as Canada. The idea for such a tax was believed dead after G20 finance ministers met in South Korea earlier and backed away from such a proposal.
It’s yet another challenge for the summit, which will also be grappling with a plea by the United States that world leaders not put the global recovery at risk through widespread cutbacks. European governments are in the midst of such austerity measures to bring their finances under control, while Canada, the host country, has also urged deficit targets.
British Chancellor of the Exchequer George Osborne’s decision to tax total bank liabilities at 0.04 per cent beginning in January, rising to 0.07 per cent a year later, did not rattle investors, who had expected a higher figure. But it was dismissed by some tax accountants as political pandering and by bankers as harmful to an industry that is only just recovering from a crisis that nearly destroyed it.
The British Bankers Association fears British banks and their foreign subsidiaries will be hit with overlapping levies, hurting their ability to compete, as they are introduced in various countries.
“Bank levies need to be co-ordinated internationally: they must not prevent the industry in the U.K. from being able to compete,” the association said. “It is essential that the international banks do not find themselves taxed multiple times for the same thing.”
