By: Mike Campbell
In the time honoured fashion of bolting the stable doors long after the horse has fled, the IMF are expected to announce proposals for raising funds from the financial sector that could be used to pay for a future financial crisis. Details will be presented at the Spring IMF meeting in Washington at the weekend, but the plan has been circulated to G20 members in advance of the meeting. The BBC obtained a copy of the documents which reveals that two new taxes are being proposed. The first would initially be a flat rate tax, or levy, and the second tax would be applied to profits and pay. The plan would extend to the whole financial sector, and not just banks, to avoid the creation of loopholes that might be exploited by devious bankers.
The financial stability contribution (levy) would eventually be adjusted such that riskier activities are levied at a higher rate. The proposals stem from last year’s G20 summit in London where leaders decided that the banks, rather than the tax payer, should be expected to foot the bill for any future financial crisis. Naturally, the initiative is not likely to go down a storm with the financial sector. Should the IMF proposals be adopted globally, it would remove the concerns expressed in financial quarters that new (nationally imposed) tax measures would prompt financial institutions to relocate to jurisdictions with less punitive tax regimes in place. UK Chancellor, Alistair Darling welcomed the IMF proposals, commenting that "The recognition that banks should make a contribution to the society in which they operate is right." Obviously, the fact that banks pay corporate tax on their profits must have just slipped his mind; it being an election year in the UK and all.