The proposed new taxes on the financial industry to target excess profits and compensation, show the International Monetary Fund (IMF) to be moving the regulation debate forward massively, say advocates of economic justice, poverty elimination and a new fiscal deal. But they add that the IMF's ideas still fall a long way short of the change needed.
The IMF paper was leaked to the BBC and posted on its website yesterday. It says that banks and other financial institutions face paying two taxes to fund future bail-outs.
The main IMF-backed levy would raise the equivalent of at least 2 per cent of a country's economic output - around $300 billion in the US - and should be set aside to underwrite the cost of seeing failed institutions through bankruptcy, reports The Washington Post.
The proposals will now be reviewed by the Finance Ministers of the G20 group of rich and emerging countries, whose representatives are in Washington this week.
"The IMF has given a green light to taxing banks, which is positive. We need to see hundreds of millions of dollars every year going to fight poverty and climate change," said Elizabeth Stuart from Oxfam.
"While clearly not their favoured option, the IMF has said that there are no practical objections to the financial transactions tax and that it could be applied on top of another bank levy," she added.
On his blog, Owen Tudor of the Trades Union Congress (TUC), one of the movers behind the Robin Hood Tax on financial transactions for global poverty reduction, which has been backed by civic, faith and other NGOs, commmented that "[t]he IMF’s new Financial Activities Tax (FAT) goes far further than we expected. But it’s no Robin Hood deal."
He adds, writing in a personal capacity: "So, is it enough? No, not by a long chalk. The IMF report accepts that the costs of the financial and economic crisis amount to 2.7 per cent of GDP in the advanced G20 economies (ie nearly £50 billion), but the Financial Activities Tax would raise (in the UK, the only place where it gives a figure) just 0.1-0.2 per cent – or £1.75 billion to £3.5 billion... Even the Robin Hood Tax would not have raised enough to pay for the entire crisis, but it could have raised a substantial chunk - possibly an order of magnitude more than the FAT tax, that is as much as £30 billion - though these are rough figures."
Campaigners say they will use the debate stoked by the proposals to push for more substantial reform.
The economic commentator, Will Hutton, a critic of neoliberalism, said last night on BBC television that the IMF's proposals were "very important" and a "giant step forward".
Ekklesia is one of the active supporters of the Robin Hood Tax campaign: http://robinhoodtax.org.uk/
Also on Ekklesia: Owen Tudor of the TUC analyses the IMF's proposals - http://www.ekklesia.co.uk/node/11935