BBA pooh-poohs global banking ‘tax’

When is a banking tax not a banking tax? When bank indus­try representatives say it’s not.

Gordon Brown came out last week with political guns blazing to say the UK was working with other leading economies in finalising the plan for a global banking tax, but the British Banking Association, perhaps surprisingly, is unfazed by the prospect.

In a tax climate which has seen the terms “Tobin” and “Robin Hood” become the stuff of nightmares for banks, the BBA has questioned whether this is really a tax at all. The BBA’s understanding is that what has been discussed is some kind of global insurance based “levy”.

“It has been described as a tax, but that’s maybe because it’s what people want to hear,” a BBA spokesman said.

In the backdrop of an uncertain economic climate, which has seen the banking industry become the whipping boys of a world in financial turmoil, the BBA says it will keep a close eye on the situation.

“We will certainly be resp­onding to the Treasury on this,” the spokesman added.

The latest plan – where banks put into a collective pot as insurance against another crisis – comes after the failed offensive on bank transactions: the so-called Tobin Tax. Critics warned that such a scheme would be impossible to man­age effectively, and cruc­ially the US shot down that option.

After the G20 summit US Treasury Secretary Timothy Geithner said last November: “That’s not something that we’re prepared to support.”

Gordon Brown is putting plans together in the belief that the IMF will endorse a global bank levy before its April meeting in Washington.

The prime minister then hopes that a deal can be rubber-stamped at the G20 summit in Canada in June.

As the 50% top rate of income tax looms large on the horizon and the payroll tax takes effect, the banking industry will hope that this insurance levy does not evolve into another tax, if and when it gets the green light.

bba.org.uk