Bank tax

A bank tax ("bank levy") is a tax on banks. One of the earliest modern uses of the term "bank tax" occurred in the context of the financial crisis of 2007–08.

On 16 April 2010, the International Monetary Fund (IMF) proposed the idea of a "financial stability contribution" (FSC), which many media have referred to as a "bank tax." It was proposed as one of three possible options to deal with the crisis. These options were presented in response to an earlier request of the G-20 leaders, at the September 2009 Pittsburgh summit, for an investigative report on all possible options to deal with the crisis.

Both before and after that IMF report, there was considerable debate amongst national leaders as to whether such a "bank tax" should be global or semi-global, or whether it should be applied only in certain nations.

In the context of the financial crisis of 2007–08, in August 2009, British Financial Services Authority chairman Lord Adair Turner said in Prospect magazine that he would be happy to consider a "tax on banks" to prevent excessive bonus payments.

At the September 2009 G-20 Pittsburgh summit, the G20 nation leaders asked the IMF "to prepare a report for our next meeting with regard to the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system."

When the IMF presented its interim report for the G20 on April 16, 2010, it laid out the following three options. Notice that they are all distinct from each other:

Much of the IMF’s report is devoted to the first option of a levy on all major financial institutions balance sheets. Initially it could be imposed at a flat rate and later it could be refined so that the institutions with the most risky portfolios would pay more than those who took on fewer risks. Such a levy could be modeled on President Obama’s proposed Financial Crisis Responsibility Fee that would raise US$90 billion over 10 years from US banks with assets of more than US$50 billion. If Obama’s proposal is approved by the US Congress, the proceeds would go into general government revenues. They would be used to pay the costs of the current crisis rather than go into an insurance fund in anticipation of the next one.

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