05 October 2009

IMF Presses for Tax on Banks' Risky Behaviour

Excerpt from The Guardian, 2 October 2009

'The International Monetary Fund today threw its weight behind a new tax on the global financial sector designed to limit risky speculative behaviour and help the world's poorest countries.

Dominique Strauss-Kahn, the IMF's managing director, said banks and other big financial institutions were responsible for systemic risk and it was only right that they provided resources to mitigate those threats to the world economy.

While ruling out a so-called Tobin tax – a levy on foreign currency transactions proposed by the American economist James Tobin in the early 1970s – Strauss-Kahn said a high-level IMF team would work on proposals in the coming months.

"The very simple idea of putting a tax on transactions won't work for many technical reasons," Strauss-Kahn said at a press conference held in the run-up to the IMF's annual meeting in Istanbul next week.

"On the other hand, considering the financial sector is creating a lot of systemic risks for the global economy, it is fair that the sector pay some part of its resources to mitigate risks it is creating itself."

Strauss-Kahn said a team led by the IMF's number two, John Lipsky, would be looking at the merits of setting up a fund that would provide some form of insurance against future financial crises, as well as help for low-income countries.The fund was asked to investigate "Tobin-style" taxes by last week's G20 summit in Pittsburgh following pressure from the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy...

This idea returned to public prominence at the end of August when Lord Turner, head of the UK's Financial Services Authority, said that the swollen and "socially useless" banking sector should be taxed back down to size...

Max Lawson, senior policy adviser to Oxfam, said: "This could be a hugely popular tax, making the banks pay for the mess they made. Bankers will fight this tooth and nail but they must be resisted by G20 leaders."'

No comments:

Post a Comment

Please leave your comment here. Please note these stories are posted for information rather than for debate; if you wish to disagree with something posted, no problem, but since I post both things that I do and don't support, it would be appreciated if the criticism was about the issue.