India has its way on bank tax at G-20

G20-BANKTAX

V S Chandrasekar
Toronto, Jun 28 (PTI) India's stand against any tax on
banks for funding bailouts was vindicated, with the G-20
leaders agreeing that any such levy should be left to
individual nations.
Discussing the issue threadbare, the leaders of the
developed and fast developing economies declared that though
the financial sector should make a fair and substantial
contribution towards paying for any bailouts, policy should
take into account each nation's "circumstances and options."
It may be recalled that just before G-20 summit here,
Indian Finance Minister Pranab Mukherjee had said, "We are not
in favour of having taxation on banks." He voiced India's
opinion within days of participating in the G-20 ministerial
meeting at Busan, in South Korea.
In their Toronto declaration, the G-20 leaders, including
Prime Minister Manmohan Singh, US President Barack Obama,
German Chancellor Angela Merkel and French President Nicolas
Sarkozy, decided that while the financial sector should make a
contribution to prevent a breakdown, the policy approach
should differ from country to country.
"We agreed the financial sector should make a fair and
substantial contribution towards paying for any burdens
associated with government's intervention, where they occur,
to repair the financial system or fund resolution...
"To that end, we recognise that there is a range of
policy approaches. Some countries are pursuing financial
levies. Other countries are pursuing different approaches. We
agreed the range of approaches follow these principles:
"To protect tax payers: reduce risk from financial
system... take into account individual countries'
circumstances and options and help promote a level playing
field," the declaration said.
While countries like Britain, which has already levied a
tax, France and Germany campaigned for such a tax, India has
reservations.
It pointed out that its banking institutions were
conservative by nature and followed healthy norms that
prevented any crisis in the country in 2008.
India has been in favour of strong financial regulations,
rather than imposing a levy on the banks.
Mukherjee had said that if there were well-placed
regulations, the health of banks can be protected.
The governments in the US and several other Western
countries had pumped in hundreds of billions of dollars into
many big financial players to avert their collapse in the wake
of the economic turmoil in 2008-09. PTI VSC
RBT


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