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Transaction Tax Shelved by G20 as New Soft Agreement on Opt-In Bank Levies Creates Uneven Global Playing Field

Transaction Tax Shelved by G20 as New Soft Agreement on Opt-In Bank Levies Creates Uneven Global Playing Field

"The opt-in bank levies agreed by the G20 members is at odds with the very thing they got excited about last year in the midst of the global economic downturn, a tax to hit the financial services industry. The G20 dragged up the prospect of a financial transaction or Tobin Tax aimed at creating a harmonised playing field for global banking, an idea backed only recently by the IMF.

"What we are left with is global confusion, as politicians talk the talk, but do not seem to be moving very quickly to take action, leaving a very uneven playing field whereby banks are likely to be levied in some countries and not in others.

"The UK government has already pledged a banking levy and the US, France and Germany are expected to follow through with similar legislation. Although the proposed levies are not massive given the scale of the banks, taken alongside other measures introduced since the banking crisis of 2008 such as the bonus tax in the UK, some banks could be forced to review operational structures, for example relocation of head and branch offices from one jurisdiction to another.

"We don't yet have the detail on how the levy will be extended to foreign owned branches located within a jurisdiction implementing a levy but, under European law as it now stands, the levies could favour foreign owned branches and penalize local banks, compounding once again the arguments for coordinated and impartial global banking. These actions could leave some banks going into the global battle with one arm tied behind their backs.

"In addition the G20 has inadvertently dealt global harmonisation of taxes a further series of body blows, given that calls for an international financial transaction tax have also hit the buffers - this type of tax is simply too complicated and would require a fundamental overhaul in country-specific tax policy. In the current global economy with the focus on recovery and avoiding a double-dip global recession, an overhaul of global tax harmonisation appears to be light years away."


Frederic Donnedieu de Vabres, Chairman of Taxand, the world's largest global organisation of tax advisors to multinational businesses.

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