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TAX NEWS - June 2010

Bank Tax: EU leaders to press ahead on bank tax

BRUSSELS — EU leaders are to throw their support behind proposals for a European tax on banks to help bear the huge costs of financial crises, according to a document obtained by AFP on Saturday.

In the absence of a global consensus for such a tax, EU countries are prepared to press ahead with it in the 27-nation European Union at a June 17 summit in Brussels.

According to a draft of the final summit statement, the leaders "agree that a tax on financial institutions be introduced to guarantee that they contribute to paying for the costs of crises."

EU leaders call on their finance ministers and the European Commission to prepare a report on what form the tax should take "in October 2010", according to the document, which has already been approved by EU ambassadors.

The document said that preparations for the tax should consider how it could be implemented without putting European banks at a disadvantage to competitors elsewhere which are free from such a levy.

While a consensus has emerged in Europe in favour of such a tax, divisions persist over how to apply it, notably whether it should be on banks' assets or profits.

"In reality, the debate remains open," one European diplomat said.

Divisions also remain over what the money raised through the tax should be used for with the European Commission wanting it to go towards a rainy-day bank bailout fund and France and Germany preferring that it stays in their budgets.

Despite the lack on international consensus for a global bank tax, European countries are to make the case for it at June 26-27 Toronto summit of leaders from the G20 leading economic powers.

The global bank tax is supported by the International Monetary Fund, European powers and the United States. It is resisted by some developing nations plus Canada and Australia, who argue that they should not have to pay to clear up a mess they did not create.

Canada and Brazil, whose banking sectors emerged largely unscathed from the financial crisis, favour higher capital reserve requirements instead.
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