Economics
Time for an international bank tax?
Jun 7th 2010, 14:51 by R.A. | WASHINGTON
THERE is a new question up at Economics by invitation:
Several G20 governments are proposing a coordinated bank tax to pay for future bail outs and reduce systemic risk. Is additional taxation of the banking sector a good idea? If so, how should it be done?
In talks over the weekend, the G20 opted to abandon plans (for now at least) for an internationally coordinated bank tax, thanks in part to strong opposition from countries like Japan, Brazil, and Canada, whose banks did not need public assistance. In our forum, economist Beatrice Weder writes:
At the moment the regulatory community does not have a convincing strategy to deal with the too-systemic-to-fail problem. A levy on systemic risk combined with a cross-border resolution fund would seem the best hope. Therefore it is very unfortunate that a number of countries in the G20 that did not experience problems in their banking sectors during this crisis are strongly opposing the implementation of such a levy. Instead of blocking the idea, countries who are sure they will never ever experience a financial crisis and that their systemic risks are zero should simply set their levy to zero. Everybody else should implement this potentially highly effective macroprudential instrument.
Do have a look at all of the contributions. A bank tax would seem to be an important piece of the necessary policy tool kit.
The Economist welcomes your views. Please stay on topic and be respectful of other readers. Review our comments policy.
Sort:
Japanese IMF loans: $1.8 billion, 1946-1952 after starting horrific war Debt: 192% of GDP and still in recession-no problems there! Mind boggling.
The "tax" should be in the form of higher and more stringent equity requirements, not more revenues for governments.
A bank tax would merely discourage risky behavior, while stricter equity requirements on banks with risky assets, and other factors that increase systemic risk, would discourage risky behavior AND strenghten the banks AND boost markets (broader capitalization of financial institutions - private capital is at risk - not taxpayers.)
The Japanese banks did not require government help? Thats why Japan has had an interest rate of 0% for the last 20 years now? right
Do I really have to remind the authors that businesses don't pay taxes? They pass the cost of the tax on to customers. It's micro econ 101. Good grief!
A better way would be to privatize the FDIC and have the guv get out of the business of bailing out campaign contributors, no matter how big they are. A good law would prohibit state funds going to any business whatsoever if the corp or any of its executives gave any money to political parties or candidates. That would remove a tiny bit of the conflict of interest that pervades politics.
This is a terrible idea that will have little economic use, but potentially undermine the political sovereignty of nations.
Nondescript, how does it undermine sovereignty if the countries mutually agree to the tax and set their own rate?
I think the worry I have about the tax is that if it is not sensitive to the risk profile of the bank, it might incent more aggressive behavior as conservative banks have trouble turning the necessary profit to pay the tax and wackier ones aren't charged for their wackiness.
In this blog, our correspondents consider the fluctuations in the world economy and the policies intended to produce more booms than busts.
Advertisement
Subscribe to The Economist's free e-mail newsletters and alerts.
Subscribe to The Economist's latest article postings on Twitter
See a selection of The Economist's articles, events, topical videos and debates on Facebook.
Advertisement
We are making continuous improvements to The Economist website and are interested in your thoughts.
Please leave your feedback.
Classified ads document.write('') document.write('') document.write('') document.write('') document.write('') document.write('') About Economist.com About The Economist Media directory Staff books Career opportunities Contact us Subscribe O_GoT('[+] Site feedback');Copyright © The Economist Newspaper Limited 2009. All rights reserved.
Advertising info Legal disclaimer Accessibility Privacy policy Terms & Conditions Help /* OnlineOpinion v4.1.5 */ /* This product and other products of OpinionLab, Inc. are protected by U.S. Patent No. 6606581, 6421724, 6785717 B1 and other patents pending. */ /* Create new OnlineOpinion Object instance */ var oOobj1 = new OnlineOpinion.ocode(); /* OnlineOpinion Object Preferences */ oOobj1.Preferences = { /* Configure Object Persitence (REQUIRED) */ Persistence: { enabled: 1, // Disapear onClick cookie_name: 'oo_r', // cookie name cookie_type: 'page', // Remembers which page got rated expiration: 3600 // How long to remember each page got Rated (in secs) }, /* Configure Object Parameters (REQUIRED) */ Render: { type: 'floating', main_div_id: 'oo_feedback_float', main_content_id: "page", // Determines ID float style references as content float_style: "rightOfContent", // Can be set to "rightOfContent" or "fixedPreserveContent" img_path: '/sites/all/modules/opinionlab/images/oo_black.gif', feedback_html: 'Feedback', click_html: 'Click here torate this page' }, Plugins: { /* Configure URL Rewrite (optional) */ URLRewrite: { active: 0, regex_search_pattern: "" , regex_replace_pattern: "", full_url_rewrite: "" }, /* Configure Embedded Comment Card (optional) */ CardOnPage: { enabled: 0, close_link: "" } } } /* Configure Custom Variables to Accompany Survey (optional) */ // oOobj1.Metrics.custom.clientID = 1234; // oOobj1.Metrics.custom.countryCode = "usa"; /* Object Registration (REQUIRED for [+] Floating Icon) */ OnlineOpinion.util.SafeAddOnLoadEvent(function(){oOobj1.render(function(){oOobj1.show()}) }); /* OnlineOpinion v4.1.5, Copyright 2009 Opinionlab, Inc. */Copyright © The Economist Newspaper Limited 2009. All rights reserved.
Read Full Article »