Despite opposition from the G-20 to a global bank tax, the UK will move ahead with its own version of the tax. Chancellor George Osborne is widely expected to include the tax in his June 22 budget. The tax, which is similar to the one proposed in the US, would be levied on banks in a misguided pointless scheme to create a fund to “protect” customers from future banking crises.
The idea, in its most simple terms, is that banks will be taxed to protect “us” from “them.” Of course, since its a no brainer that the banks will simply pass those taxes along to its customers, the tax is really on us. So, putting it into perspective, we’re going to pay into a fund in order to protect ourselves from the banks and their bad decisions. It’s brilliant, isn’t it?
The insanity of it all is perhaps why there is so much opposition to the tax internationally. The effort opposing the tax on a global scale has been led by Canada. Interestingly, Canada did not have a TARP-like rescue of its banks during the financial crisis. In fact, Canada didn’t bail out its banks at all; our friends to the north apparently have a different definition of “too big to fail” which might explain why their banking system is considered one of the safest in the world (the report with these findings can be downloaded here as a pdf). Their reaction to the crisis was downright laissez-faire of them (quite fitting for French-Canadians, I suppose).
The pushback from Canada was enough to convince the others to scrap the tax – who knew that Canada had that kind of power? Of course, the banking system might have had a little bit to do with it, too. The G-20 is made up of the finance ministers and central bank governors of 19 countries:
- Argentina
- Australia
- Brazil
- Canada
- China
- France
- Germany
- India
- Indonesia
- Italy
- Japan
- Mexico
- Russia
- Saudi Arabia
- South Africa
- Republic of Korea
- Turkey
- United Kingdom
- United States of America
Since that’s only 19 (and G-19 didn’t have the same ring to it), the European Union, who is represented by the rotating Council presidency and the European Central Bank, is the 20th member
The G-20 has a lot of power and influence around the world – just check out that list of countries again if you’re not convinced. Policy made at the G-20 carries a lot of weight in the economic and political markets of other countries. The rejection of the global bank tax is likely to have a far reaching effect. Despite the UK’s brave face on this one, the tax notion of the bank tax is likely dead in most countries across the world (the US perhaps being the exception but don’t count on it). Expect this issue to come up again in November when the G-20 scrambles to figure out how to address future financial meltdowns.
