Ahead of the upcoming June G20 Summit in Toronto, Canada, the German and Canadian Governments are increasing efforts in swaying international Governments towards their views on the proposed introduction of an international bank tax system. At a conference on new financial regulations held in Berlin on May 20th, German Chancellor Angela Merkel stated “We will campaign for a tax on the financial markets and we will campaign for that at our (G20) summit in Canada.” While in the week leading up to Angela Merkel’s statements, several Federal Canadian Cabinet Ministers met with select international delegations to advocate an opposition to an international bank tax.

On May 18th Jim Flaherty, Finance Minister of Canada, met in Mumbai with representatives of the Indian Government to explain the Canadian view on an international bank tax. On the same day, Stockwell Day, Minister for the Asia–Pacific Gateway, held a meeting in Beijing, and Peter Van Loan, International Trade Minister, spoke at a conference in Washington D.C. All three officials campaigned against any proposed bank tax. Tony Clement, Industry Minister of Canada, hosted a corresponding conference in Canada and explained the Government’s stance, saying, “Make no mistake, our government is opposed to a global bank tax. This tax would reach into consumers’ pockets and punish our financial institutions, which have taken precautions to avoid turmoil.” The Canadian Government has also explained that the national bank system is safe and renowned for its stability, and the Canadian finance industry should not have to pay for the mistakes of other nations. Stockwell Day has already reported that the Government of the People’s Republic of China fully supports and shares Canada’s sentiment.

Conversely, Angela Merkel used the current Euro-zone debt crisis to springboard into advocating the need for a set of unifying international financial regulations, including fiscal measures such as multinational bank tax. Angela Merkel stated on May 20th that the German Government will continue to rally supporters for an international bank tax until the upcoming G20 Summit. If no conclusive decision is reached among G20 leaders, the Chancellor will continue her efforts in reaching a Euro-Zone only solution.

Photo by London Summit

On May 18th the Asian Development Bank (ADB) released its annual Asian Capital Markets Monitor report, which investigates the performance and outlooks for the equity, bond and currency markets in emerging economies. According to the report, several factors have cumulatively increased the risk of Asian economies facing sudden high levels of investment capitals, leading potential destabilization of currency and financial markets.

Amidst worries of a continued national debt crisis in Greece and the Euro-zone, international investors have been paying greater attention to Asian economies. The interest has been further increased by the area’s swift and secure return to a positive economic condition after the international economic crisis. The ADB claims that the increased capital inflows could trigger significant upwards pressure in national currency, leading to volatility in valuation and the financial markets. Additionally, national inflation, which among emerging Asian economies is widely considered to be manageable, could be caused to increase. Cumulatively, sudden burst in overseas investment capital might lead to limitations in short and mid-term growth potential for emerging Asian economies.

The ADB recommends that Governments of vulnerable economies take action now to ensure that appropriate national policies are ready for potential investment inflows. Suggested policy considerations consisted of sound macro-economic management, flexible foreign exchange regimes, increased resilience of national financial systems, along with temporary and targeted capital controls. The suggestion of capital controls is especially aimed at nations which expect capital inflows to be transitory with significant destabilizing effects on exchange rates, and with uncertain national macro-economic policies.

Under the ADB’s classification, the emerging Asian economies consist of the People’s Republic of China, Hong Kong, India, Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore, Taipei, Thailand and Vietnam.

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On March 18th the Organization for Economic Cooperation and Development (OECD) announced the initiation of the first step in the most extensive and through international tax transparency assesment process that has ever been undertaken. Eighteen nations from the 91 participating members of the Global Forum on Transparency and Exchange of Information will soon undergo extensive analysis to determine the adequacy of their efforts to implement internationally agreed upon taxation standards, such as the effectiveness of the bilateral Tax Information Exchange Agreements (TIEA) which were signed by all participating jurisdictions. The first set assessment results are expected to be published before the next Global Forum meeting to be held in Singapore in September 2010. The eighteen reviewed nations will consist of Australia, Barbados, Bermuda, Botswana, Canada, Cayman Islands, Denmark, Germany, India, Ireland, Jamaica, Jersey, Mauritius, Monaco, Norway, Panama, Qatar and Trinidad & Tobago.

The peer-reviews come as a response to calls raised by G20 leaders at their Pittsburgh Summit in September 2009 for greater tax transparency and a “robust peer review mechanism” to ensure the rapid, timely and appropriate implementation of the OECD standard on information exchange. Mike Rawson, Chair of the Global Forum, commented on the upcoming reviews, saying: “…this is the most comprehensive, in-depth review on international tax co-operation ever…The peer review process will identify jurisdictions that are not implementing the standards. These will be provided with guidance on the changes required and a deadline to report back on the improvements they have made.”

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According to research by international law firm Eversheds, published on December 14th, there is a resurgence in business confidence and future outlook across key global economic centres, and the Eastern markets are showing the most significant improvements. The report engaged 600 senior executives to show the effect of the economic downturn and its results on their confidence in London, New York, Shanghai, Mumbai and the United Arab Emirates (UAE).

The study reports that executives in Shanghai, UAE and Mumbai have highest levels of confidence for the next 12 months, though all respondents believe that New York will continue to be the most significant financial centre in the coming 10 years, followed by London and Shanghai.

According to the report, London has the lowest levels of confidence, with only 22 percent seeing a positive economic outlook for the next 12 months. Comparatively, 92 percent of respondents in Mumbai and 91 percent in Shanghai foresee positive economic changes. According to the opinions of the majority of respondents in Mumbai and New York, business taxation is the primary barrier to growth. The lack of regulation protecting business was seen as the main obstacle to business growth in Shanghai and UAE, though the large volume of regulation was seen as a growth inhibitor in London.

Summarising the report, the research indicated that “…the business world will be definitely smaller post-recession and the old economic order has changed. For businesses that trade on an international scale, the challenge will be to adapt and survive in the face of fierce competition”.

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In what the Indian Income Tax Department (ITD) labeled as “impressive growth,” the CBDT reported net tax collections of INR1,838 billion for the April up to November period, from INR1,776 billion in the equivalent period in the previous fiscal year. PIT collection, which includes Fringe Benefit Tax, Security Transaction Tax and Banking Cash Transaction Tax, totaled INR703 billion, compared to the previous year’s INR672 billion, making a rise of 4.53%. Corporate Taxes collected for the period increased by 3.17%, from INR1,097 billion to INR1,132 billion. Individually, the Securities Transaction Tax grew by 4.44% to INR43.5 billion.

Tax collection figures for November, when compared to the previous November, rose by a cumulative 0.28%. Corporate Tax collections in November 2009 fell by 29.5% to INR32.1 billion, from November 2008′s INR 45.6 billion. PIT receipts rose by 23.8% to INR71.6 billion from the previous INR 57.9 billion figure.

However, with only four months left in the current fiscal year, direct tax collection in India is well short of its INR 3,700 billion target.

Photo by Robert S. Donovan