Bank tax campaign scents victory as Gates signs up

Momentum gathered for a financial transaction tax (FTT) yesterday as the Bill Gates' foundation made the case for a levy to the G20 finance ministers in Washington. Even before Mr Gates' team made its presentation, details of a draft European directive emerged proposing that the European Union should go it alone in imposing a tax on financial trades.

The proposal called for harmonisation of member states' taxes onfinancial transactions. The move aims to create new revenue for EU members to replace national contributions to the Brussels' budget.

The tax would be broad, covering trades including shares, bonds, derivatives and structured products to make sure activity does not move from one product to another to evade the levy. The proposal does not specify rates for taxing particular trades.

But Mr Gates called for an FTT to be used to support economic development in poor countries. Geoff Lamb, the head of policy at the Bill & Melinda Gates Foundation, presented the case for a modest levy on share and bond transactions across the G20 that could raise $48bn (£31bn).

The UK Government is wary of proposals for an FTT and argues it would have to work globally to stop non-participating jurisdictions snapping up business. However, Mr Gates argues that this is unnecessary.

America's richest man is said to have been sceptical about an FTT when he started working on his report. One of the examples that won him over was the successful operation of Britain's stamp duty on share trades. "FTTs of various kinds [work in] India and the UK and therefore seem feasible even without adoption," Mr Lamb said.

Simon Chouffot, a spokesman for the Robin Hood Tax campaign, said: "It's a bit disingenuous of the UK Government. Its own stamp duty on shares works very well."

A spokesman for HM Treasury in London said: "The Government will continue to engage with its international partners on financial transaction taxes. But any financial transaction tax would have to apply globally."

The Nobel Prize-winning economist James Tobin was first with the idea of a financial transactions tax in 1972 when he proposed a levy on currency trades to reduce speculation afterexchange controls were scrapped.