Page last updated at 15:50 GMT, Friday, 11 December 2009

EU calls for tax on bank transactions

UK Prime Minister Gordon Brown and French President Nicolas Sarkozy
Gordon Brown and Nicolas Sarkozy have called for a "Tobin Tax"

European Union leaders have urged the International Monetary Fund (IMF) to consider implementing a global tax on financial transactions.

A so-called "Tobin Tax" has been pushed by France and the UK, but is less popular in the US.

The leaders called on the IMF to look at a range of options to ensure that banks do not take excessive risks that could lead to another financial crisis.

The call came at the end of a two-day EU summit in Brussels.

"The European Council emphasises the importance of renewing the economic and social contract between financial institutions and the society they serve, and of ensuring that the public benefits in good times and is protected from risk," the statement said.

Speaking at the summit, UK Prime Minister Gordon Brown said: "We need a better relationship between the banks and the people they serve.

"There has been a growth in support in recent weeks for this idea and many, many countries are looking at it."

'Old idea'

A Tobin Tax, named after the Nobel Prize-winning economist James Tobin, was originally designed to raise funds for developing nations.

I don't think we can introduce a bonus tax for this year. That might raise constitutional problems
Angela Merkel, German Chancellor

However, following the financial crisis, the tax is now seen by many as a possible way to help insure against future crises.

But while the tax has been promoted by Mr Brown and his French counterpart Nicolas Sarkozy, the US and the IMF have been less enthusiastic.

At a meeting of G20 finance ministers last month, IMF head Dominique Strauss-Kahn described a tax on financial transactions as "a very old idea that is not really possible today".

The EU's member states are clearly hoping to change his mind.

Mr Brown and Mr Sarkozy also announced that Britain and France would contribute at least 1.7bn euros ($2.4bn; £1.5bn) each towards the 7.2bn euros EU leaders have pledged to help developing nations fight climate change over the next three years.

Bonus tax

Earlier this week, the UK announced a 50% tax on bank bonuses above £25,000.

France has said it is considering a similar tax on bonuses above 27,000 euros. Reports suggest the tax could be announced later.

"We have been advocating this for a long time, and we are delighted to see that [the UK Prime Minister] is taking that stand," said French Finance Minister Christine Lagarde.

But Germany is unlikely to follow the lead of its two European partners in the short-term.

Chancellor Angela Merkel, also attending the EU summit, said: "I don't think we can introduce a bonus tax for this year. That might raise constitutional problems."

However, 11 German financial institutions announced on Friday that they had signed an agreement on pay and bonuses.

The firms, including Deutsche Bank, Commerzbank and Hypo Vereinsbank, and insurer Allianz, agreed to ensure that remuneration was aligned towards longer-term, "sustainable business success".

Print Sponsor

China Post Europe in support of 'social' tax on banks worldwide - 9 hrs ago
Melbourne Age EU asks IMF to consider global Tobin tax - 41 hrs ago
AFP via Yahoo! Europe urges 'social' tax on banks worldwide - 42 hrs ago
Globe Investor EU calls for global financial levy - 45 hrs ago
Reuters India EU backs global financial transaction tax - 46 hrs ago

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