European Union leaders urged the International Monetary Fund yesterday to consider a global tax on financial transactions, in spite of US opposition and doubts at the IMF itself.
In a communiqué after a two-day summit, the EU’s 27 national leaders stopped short of a formal appeal for a so-called Tobin tax but made clear they regarded it as a potentially useful
Separately, Gordon Brown, the UK prime minister, and Nicolas Sarkozy, France’s president, suggested that revenues from such a tax could be devoted to the world’s fight against climate change, especially in developing countries.
They said funding from 2020 could come from “a global financial transactions tax, and the reduction of aviation and maritime emissions and the auctioning of national emissions permits”.
However, British officials later argued that the main point of a financial transactions tax would be to insure the global taxpayer against a future banking crisis.
European support for the Tobin tax, named after James Tobin, the late US economist, has grown since the world’s financial system plunged into crisis 15 months ago, forcing governments in the US and Europe to rescue and recapitalise banks to the tune of hundreds of billions of dollars.
But Tim Geithner, US Treasury secretary, told the G20 nations last month that the US was unwilling to back a tax on daily financial market activity.
Opposition was also voiced by Dominique Strauss-Kahn, the IMF managing director, who said the Tobin tax was “a very old idea that is not really possible today”.
The EU statement stressed “the importance of renewing the economic and social contract between financial institutions and the society they serve”.
It urged the IMF “to consider the full range of options, including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy”.
Mr Brown, who has gradually become convinced of the advantages of a levy on financial transactions, told reporters at the EU summit that he recognised it would not work unless it applied in financial centres worldwide.
“Global taxes will not be introduced unless all global financial centres are able to come behind them. But I believe there’s growing support for that,” the British premier said. “We’re trying to make a global supervisory system that makes sense for all the financial centres in the world.”
Global daily turnover in foreign exchange markets alone is estimated to have risen to $3,200bn (€2,191bn, £1,970bn) in 2007, according to the Bank for International Settlements, which groups central banks.
Tobin-tax supporters, such as Bernard Kouchner, France’s foreign minister, have suggested €20bn-€30bn a year could be raised by a levy of only 0.005 per cent.
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