Governments worldwide are giving increasing indication that they will soon begin to instate some form of financial transaction tax or bank levy in an effort to bolster national budgets, reduce financial speculative activity and provide fiscal reserves for future bailouts and financial crises.

Public pressure and media attention has helped the idea of a new set of bank taxes rise from a short discussion at the 2009 G20 Pittsburg Summit to a key consideration for major economies worldwide. France, Germany and the UK have all recently come forward announcing their principal support for various forms of new financial taxes, while the International Monetary Fund (IMF) has stated that it would be justifiable for banks to carry a heavier taxation burden.

On March 31st at a joint press conference held by the German and French Finance Ministers, Germany announced that a new proposal to instate a banking industry “stability levy” has been passed in its Cabinet. The new levy will be charged on the annual balance of assets held by banks, and is anticipated to raise approximately €1.2 billion per year. Wolfgang Schaeuble, Finance Minister of Germany, said that he expects the legislation for the proposal to be finalized by late 2010. Germany’s progression in implementing the levy will be closely monitored by other nations, with France already pledging to thoroughly investigate a similar move. Elaborating on the French Government’s stance Christine Lagarde, Finance Minister of France, said: “We also are fundamentally in agreement on the international nature this mechanism should have, and on the fact that we have to preserve a level playing field between banks that are active on international financial markets.” She continued by explaining that France will be eager to see the outcome of Germany’s actions, saying that their results “will be very useful to us.”

On the same day, on March 31st, Alastair Darling, the UK Chancellor of the Exchequer, sent a letter to G20 member nations urging them to cooperate in the creation of a unified bank levy. In his message he wrote, “A systemic risk levy should not be seen as an insurance policy to benefit individual institutions, shareholders or creditors. To minimise moral hazard the proceeds of a levy should go into general taxation rather than a stand-alone fund.”

At a grass roots level, support has been rising in the UK for a “Robin Hood Tax”, which consists of a 0.05 percent tax on pre-determined financial transactions. Supporters of the measure claim that collected revenues should be deposited in a separate fund, which will then finance initiatives for worldwide climate change, education and health projects. While the Governments of Germany, France and the UK have given hypothetical support and shown willingness to consider a bank transactions tax, no party has yet offered to use all revenues for goodwill endeavors.

Photo by Adam Tinworth