Chancellor welcomes IMF call for new bank taxes

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The Independent Online

Chancellor Alistair Darling welcomed reports that the International Monetary Fund is calling for two new taxes on the banks to pay for future bail-outs.

The IMF watchdog is calling for a "financial stability contribution" (FSC) to pay for the "fiscal cost of any future government support to the sector", according to a report leaked to the BBC.

The levy, which would be imposed on all financial institutions, not just banks, would initially be charged at a flat rate although it would eventually be modified so riskier institutions are charged more.

A second "financial activities tax" - FAT - would be levied on the sum total of the financial institutions' profits and the remuneration they pay their staff, including bonuses.

The report, which will form the basis of a submission to the G20 summit in June, states international cooperation in the introduction of the new levies would be "beneficial".

"Countries' experiences in the recent crisis differ widely and so do their priorities as they emerge from it. But none is immune from the risk of a future - and inevitably global - financial crisis," it said.

"Unilateral actions by governments risk being undermined by tax and regulatory arbitrage."

Mr Darling said they were "important proposals" and backed Labour's position that any tax on the banks should be levied internationally.

"The recognition that banks should make a contribution to the society in which they operate is right," he said.

"Any agreement has to be international and unilateral attempts - as proposed by the Tories - would simply risk being undermined.

"It was the Labour Government that first proposed an international levy and we want proposals agreed as soon as possible."

Liberal Democrat treasury spokesman Vince Cable also welcomed the report.

"Many of the banks are still unwilling to acknowledge the massive debt they owe the taxpayer and that they are still underwritten by our money," he said.

"The Liberal Democrats understand that the old way of banking simply cannot continue and this is a view shared by the IMF.

"If we are to create a stable banking system, we must ensure that taxpayers are not expected to underwrite the risks of reckless casino banking, and that pay and bonuses within banks do not reward irresponsible behaviour."

Shadow chief secretary to the Treasury Philip Hammond welcomed the IMF move.

He told the BBC Radio 4 Today programme: "We have led the way on this debate. We have already committed to introducing a tax on banks.

"We are very pleased this report has been published."

He said the levy should not be set aside for a future crisis, adding: "We believe this is a tax receipt that should go into the general taxation pot."

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