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.