TAX NEWS - JUNE 2010

Britain going ahead with bank tax, PM David Cameron tells Stephen Harper

by Richard J. Brennan, 03 June 2010 -- Prime Minister Stephen Harper flew all the way to the United Kingdom but failed to convince newly-minted British Prime Minister David Cameron that a bank tax is a bad thing.

Harper was hoping to keep the controversial proposed tax off the agenda at the G20 summit in Toronto but Cameron made it clear Thursday during Harper's visit here that Britain is going ahead with the tax whether Canada and other countries are on board or not.

"We are trying to deal with a problem here ... the fact we had to bail out our banks in the UK but (also) a deeper problem, which is effectively some of these large institutions now have a complicit guarantee that they will always be saved. And in turn for that complicit guarantee, it does seem to me there is a logic in saying there is a charge they should be paying in respect of that," Cameron told reporters.

"We've always made clear here in the UK that we will press ahead with this measure anyway, partly because of the large support the taxpayer has given to the banks."

Countries such as Britain, France, the United States and Germany favour a global bank tax to crack down on the financial sector in the aftermath of the economic crisis that began on Wall Street and engulfed the world. The European Union also supports the levy.

Britain has spent billions of dollars to bail out its banks.

Harper's visit illustrated the gulf between the two countries on the proposed levy, which appears certain to be a contentious topic at the G20 summit later this month. The prime minister's next stop is Paris on Friday, where he is to meet with French President Nicolas Sarkozy.

"Here in Britain, the population is outraged about having to have bail out the private sector. That's not the case in Canada. That's obviously why we see this situation very differently," Harper said.

"I think if you look around the world, if you look at the countries in the G20, you will see those who favour that bank tax versus those who don't almost directly relates to whether the taxpayers had to bail out their financial sector."

Cameron said while the leaders differ on the tax, "we are very keen on the fiscal consolidation that Canada is talking about that we are going to have to put into place here dealing with the budget deficits that we believe are holding back our economies."

Cameron, who described himself as the "new kid on the block," told reporters he agrees with Harper's emphasis on a maternal health initiative for African countries to be discussed at the G8 summit.

"It is a scandal, a shame, and a tragedy that so many mothers die in child birth and so many children don't reach their fifth birthday," he said.

In Canada, Harper's decision not to fund abortion as part of the maternal health initiative has been controversial, with critics accusing the Conservative government of imposing right-wing values on developing countries. Cameron was silent on the abortion issue.

Over lunch the two men talked about the war in Afghanistan, the nuclear threat from Iran, the instability of North Korea and climate change.