IMF report to G20 on taxing the financial sector - Oxfam analysis

The IMF’s report to the G20 on taxing the financial sector proposes two taxes on banks and
financial institutions - a flat levy on all financial institutions to help insure against future
crises, and “Financial Activities Tax” (FAT) on bank profits and salaries to help pay for the
costs of the current crisis.

The IMF has fatally undermined arguments that financial transaction taxes were impossible.
The IMF said it was practical and many countries have them. However they concluded that
a package of taxes, including a levy and a FAT, would be the best way to repay the costs of
the crisis and to pay crises to come.

Implications

The IMF has now given G20 leaders meeting later this week the go-ahead to tax banks and
hedge funds. The FAT could be exactly the instrument needed to make the banks pay for
the damage they’re wreaked on global economics. The global economic crisis has plunged
millions more people into poverty, and the bank tax must be used to help them.

The IMF’s proposed taxes are a major step forward, but the report falls short on two counts.
Firstly, amounts of money that the IMF suggest this tax would raise are not sufficiently
ambitious - $11 billion (£7bn) a year - not nearly enough compared to the pain the crisis has
caused and will barely dent the profits of the banks. Secondly, the report makes no
commitment to ensuing money raised would be used to help poor countries and fight climate
change.

A much bigger tax is needed, one that will raise tens of billions in rich countries to fill their
fiscal holes, but also hundreds of billions globally to fighting poverty and climate change.

There is no doubt banks can afford to pay up. The global banking sector reported profits of
$700bn last year and Goldman Sachs is already filling this year’s bonus pot.

For information and interviews: Caroline Hooper-Box +1 202 321 2967

caroline.hooper-box@oxfaminternational.org