London, November 08: The US and Britain are at odds over a proposal that would impose a new tax on financial transactions to support future bank rescues.
On Saturday, British Prime Minister Gordon Brown, hosting a meeting of Group of 20 finance ministers in St. Andrews, Scotland, said a system of taxing banks, such as the Tobin tax, should be considered as a way to take the burden off taxpayers during periods of financial crisis, The New York Times reported.
A Tobin tax is the suggested tax on all trade of currency across borders. Named after the economist James Tobin, the tax is intended to put a penalty on short-term speculation in currencies.
However, the proposal was met with little enthusiasm by the US Treasury Secretary Timothy F. Geithner, who told Sky News in an interview that he would not support a tax on everyday financial transactions.
Later he seemed to soften his position, saying it would be up to the International Monetary Fund to present a range of possible measures.
Russian Finance Minister Alexei Kudrin also said he was skeptical of such a tax.
Similar fees had been proposed by Germany and France but rejected by Brown’s government in the past as too difficult to manage.
But Brown is now suggesting “an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global financial transaction levy.”
The finance ministers agreed that economic and financial conditions had improved but that the recovery was “uneven and remains dependent on policy support,” according to a statement released by the group.
The weak condition of the economy was illustrated on Friday by new data showing the unemployment rate in the United States rising to 10.2 percent in October, the highest level in 26 years.
The G20 finance ministers also acknowledged that withdrawing stimulus packages required a balancing act to avoid stifling the economic recovery that has just begun.
—–Agencies