Proponents of the global bank levy tax (distinct from the Financial Transaction Tax or ‘Robin Hood Tax’-background here-which was already off the G20 table) suffered a major setback this past weekend in Busan, South Korea. The G20 finance ministers decided to drop the tax, under pressure from its chief opponent, the Canadian government, as well as Australia, Japan, and Brazil. The decision was based on the usual argument that the levy would punish banks that had acted responsibly, and that other mechanisms such as increased capital requirements were more appropriate for dealing with future bank crises.
The pronouncement does not preclude countries from creating their own bank tax, and the G20 has stated that it is even willing to provide institutional support for countries to do so. However, without the buy-in across the board that a G20 agreement would have provided, it is difficult to see how a bank tax within one nation could work. If taxed with in a given country, banks would have an incentive to begin shifting investment towards those countries that rejected the tax.
Instead, the focus must continue to be on building the global tax across the G20. It is possible it will be discussed at the November G20 meeting in South Korea, especially if, rather than folding from this setback, civil society continues to amp up the pressure.
Instead of accepting defeat, activists can use this time before the Seoul summit to clarify issues and address concerns that were raised in the past few of months. Public awareness of both the levy and the financial transaction tax has increased significantly, and it moved further up the G20 agenda than anyone could have imagined even a year ago. Though the bank tax has been dropped off the agenda for the Toronto summit, the fight will continue.
One additional thought, and this is all speculation. It seems to me that the levy probably never had any chance of passing at the G20 meeting in Toronto, but that the debate served at least two purposes for the G20 leaders.
First, Canadian Prime Minister Stephen Harper can say he was a strong crusader for Canada, was up against much opposition, stuck to his principles, and then won against all odds! The papers even wrote about it in this manner – as a victory for Canada [though it actually isn’t].
Second, the UK and French governments, under great pressure from their electorate to do something about the banks (and dealing with a much stronger bank tax movement), can say they fought hard and fought to the wire, but were unable to convince enough countries to join them to get the bank tax going. They look good, and can now get at the business at hand: gutting social spending and fighting deficits at all costs. The UK’s David Cameron already began the process this week.
Again, this is speculation and I will dig for more info, but it makes some sense, no?
More bank tax background here
[Photo from: www.flickr.com/photos/oxfamsol/sets/72157623566580145/show]