TAX NEWS - JUNE 2010

Canada Tax: G20 hold off bank tax

OTTAWA - Canada may have scored a win at the G20 with the decision to let countries decide for themselves about whether to implement a bank tax, but there's plenty more to fight over, opposition critics say.

The G20 finance ministers agreed in Korea over the weekend not to designate a global bank tax, the funds from which would have been used for future bank bailouts.

They are pushing for stricter regulations, something the Canadian government and opposition parties support, but won't have a proposal ready until the November summit.

Liberal finance critic John McCallum says the devil will be in the details, predicting debates over how much capital banks will require to hold.

"The higher the capital ratios forced on the banks, the more secure the system is, but the less banks will be able to lend money in the short run.

So there will be a big debate about how high those capital requirements should be and also on how long they should allow the banks to implement them," he told QMI Agency.

Canada opposes the bank tax and deployed cabinet ministers around the world to lobby against it. Prime Minister Stephen Harper also discussed it in his meetings last week with British Prime Minister David Cameron and French Prime Minister Francois Fillon, who both support the tax.

The Tories argued having a safety net would let the banks make risky investments, knowing there was money available to bail them out.

NDP finance critic Thomas Mulcair says he wants to see the government discussing a financial transaction tax with the G20, an idea supported by international development groups who want the world's richest countries to impose a 0.05% tax on financial transactions to fund humanitarian aid.

"If (people or companies) do move money around from country to country, we're able to impose this very small financial transaction tax and build up the money that governments are now missing as they hide the money" in tax havens, Mulcair said.

But Ted Menzies, parliamentary secretary to the minister of finance, cautioned the world's financial recovery is still fragile, saying the financial transaction tax is still a tax.

Oxfam's Mark Fried says he doubts the financial transaction tax will be on the agenda in Toronto, but hopes the issue will come up again at the November meeting.

"The economies of people living in poverty are a lot more fragile than our national economy and at some point we're going to have to come to grips with the need to provide significant support to the poorest people in the world," he said. "A fair taxation of those who have lots of money is a fair way to do it."