over the proposed bank tax at the forthcoming G-20
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the Finance Ministry has said tighter regulation will enable the
domestic banks escape any such levy, unlike most other countries in the bloc.
While the G-20 finance ministers' Busan summit earlier this
month had agreed to not impose tax on banks to fund future bailouts,
the European Union on Thursday again decided to press for the same
at the June 26-27 Toronto Summit.
Even as not calling for bank tax, the G-20 finance ministers
had agreed not to burden the taxpayers for bailouts, and asked financial
institutions to chip in to governmental efforts in this regard.
"We (G-20) have agreed in principle not to burden the taxpayers
for the bailout of failing banks," a finance ministry official had
said on the consensus reached by the G-20 fiance ministers at Busan,
South Korea, early this month.
But this does not mean every country will have to impose a bank
tax for future bailouts, since regulations also serve the same purpose
and impose a cost on banks, he clarified.
"There is no contradiction here. The consensus is that cost
should not be borne by the taxpayers. There are other ways than taxing
banks. Even tight regulation is a cost on banks as it raises the
cost of capital," the official added.
At the Busan meeting, New Delhi has objected to the bank tax
proposal and had instead suggested strengthening the regulatory mechanism
to avoid any bank failures in future.
Finance Minister Pranab Mukherjee had also said G-20 had "by
and large accepted" not to tax banks. "We are not in favour of having
taxation on banks. We suggested that ultimately you please take it
up through the regulatory route. By and large, it was accepted,"
Mukherjee had said.
Explaining, the official said there can be different ways in
which financial institutions can contribute towards governments efforts.
A tighter regulation on banks, as is in our country, is in itself
a cost to the banks, he pointed out.
"In comparison, the cost of capital is much less in most Western
countries as there is very less regulation. So, in those countries
their governments can ask for a bank levy," he added pointing to
different ways within the consensus.
However, the 27-nation European Union said in a joint communique
on Friday that the EU representatives in the G-20 will seek the support
of other nations for "further developing and exploring" possibilities
of introducing a financial transaction tax.
The EU should lead the efforts to arrive on a global agreement
"for introducing systems for levies and taxes on financial institutions",
the communique said. Besides the EU, the US favours bank tax, while
India, Australia and Canada are opposed to the idea.
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