IMF urges double tax hit on banks to refund taxpayers

Banks should be slapped with two unprecedented taxes in order to compensate taxpayers for the billions of pounds lost in the financial crisis, the International Monetary Fund has recommended.
In a report delivered to G20 nations on Tuesday, but yet to be published, the Fund has urged countries around the world to impose two new taxes on financial institutions: a "financial stability contribution" which levies a small charge on their balance sheets, and a "financial activities tax", which taxes excess profits, including bonuses.
The recommendations are likely to strike fear into a banking sector reeling from the US Securities and Exchange Commission's fraud charges against Goldman Sachs.
If imposed by G20 governments, the Fund's proposals are likely to have a significant impact on the profitability of all financial institutions.
The IMF report recommended that the proceeds of the taxes should go towards both a fund to be used to repair the economic damage wrought by this and future financial crises, and towards general government revenues.
However, it did not rule out calls from various charities to put some of the cash towards development and environmental projects.
In what may be construed as a blow to the Conservatives, who have pledged to push on with a banking tax unilaterally if necessary, the Fund said that the tax ought to be imposed by as many countries as possible. However, the recommendations are likely to be seized upon by all the major parties, making their imposition extremely likely, according to insiders.
The Fund's report rules out a financial transactions tax – something marketed by campaigners as a Robin Hood Tax – as impracticable, and likely to cause economic damage by distorting flows of capital around the world. Its recommendation of a levy on balance sheets is not a surprise, although the imposition of this tax across the entire financial system rather than just banks, is more unexpected.
Few within the banking sector had anticipated that the Fund would suggest a second tax on financial activity – as revealed by Telegraph.co.uk earlier this month. However, the Fund said that a Financial Activities Tax, which is levied on banks' cashflow, would be the least distortionary way of raising money from banks.