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Lukewarm reaction to UK tax plan Lukewarm reaction to UK tax plan
(30 minutes later)
Prime Minister Gordon Brown's idea of a financial transactions tax has received a lukewarm response from G20 countries.Prime Minister Gordon Brown's idea of a financial transactions tax has received a lukewarm response from G20 countries.
The money raised would act as a fund for bank bailouts. The proposal has overshadowed the agenda at the meeting in St Andrews.
But the US Treasury said it would "not support" a transaction tax and Canada's finance minister said it was "not an idea we would look at".But the US Treasury said it would "not support" a transaction tax and Canada's finance minister said it was "not an idea we would look at".
Chancellor Alistair Darling said the International Monetary Fund would now consider the possibility of introducing an international transactions tax. The Conservatives said that Downing Street had previously "poured cold water on this proposal" and that the Treasury had called it "unworkable".
"We do need to look ahead to see whether or not it would be possible to develop a transaction tax that would have to be universal, it would be comprehensive in its scope and would have to be compatible of financial stability as well as making sure that it is fair and didn't distort things," he said. Chancellor Alistair Darling said the leaders had agreed the International Monetary Fund should now consider the possibility of introducing an international transactions tax, which would be used to create a fund for bank bailouts.
"This is clearly work in progress, it will take time to develop but it is, I believe, an important piece of work so that we can see how better to ensure the financial services industry both contributes to the well-being of the world as a whole as well as making sure that, if we have difficulties in the future, they make a contribution to that as well." He said governments should consider whether it would be possible to develop a tax that would be universal, comprehensive in scope and compatible with financial stability, as well as fair and which would not "distort things".
He described the idea as "clearly work in progress, it will take time to develop but it is, I believe, an important piece of work".
Tobin-type taxes don't work as they require perfect or near-perfect global implementation and assume no innovation Angela Knight, British Bankers' Association G20 vows to spur fragile growth
He later told the BBC: "To rule out any possibility of change on one day wouldn't be right. That's why all of us agreed... that the IMF should look at this further.
"But the objective of making sure that people who cause so much difficulty actually contribute and pay towards solving those problems - that must be right."
Mr Brown said a global levy on financial transactions was one of the ways to make banks pay but said the UK would not introduce such a tax unless other countries did so as well.Mr Brown said a global levy on financial transactions was one of the ways to make banks pay but said the UK would not introduce such a tax unless other countries did so as well.
Other options, he said, were an insurance scheme, a global "resolution fund" or a contingent capital arrangement.Other options, he said, were an insurance scheme, a global "resolution fund" or a contingent capital arrangement.
Idea rejectedIdea rejected
The UK has in the past been opposed to transaction levies, known as Tobin taxes, believing they could damage the interests of the City of London.The UK has in the past been opposed to transaction levies, known as Tobin taxes, believing they could damage the interests of the City of London.
US Treasury Secretary Timothy Geithner dismissed the idea of a transaction tax, telling Sky News: "That's not something that we're prepared to support." BBC Business correspondent Joe Lynam said the G20's agenda "was somewhat usurped by a very interesting verbal hand grenade thrown by the prime minister into the debate" by mention of the idea of a transaction tax.
He later told a news conference: "This is an idea that has been around for a long time. Many countries have a lot of experience with the design of these kinds of taxes. I think, frankly, the experience has been mixed." But the head of the IMF, Dominique Strauss-Khan, said he believed the transaction tax was unlikely to be adopted.
"I don't believe it will be a transaction tax because transactions are very difficult to measure and so it's very easy to avoid a transaction tax," he told Sky News.
US Treasury Secretary Timothy Geithner dismissed the idea of such a tax, saying: "That's not something that we're prepared to support."
A financial transaction tax is part of the solution, along with measures to help developing countries retain the revenues they lose to tax havens Martin Hearson, ActionAid
He told reporters: "This is an idea that has been around for a long time. Many countries have a lot of experience with the design of these kinds of taxes. I think, frankly, the experience has been mixed."
Canadian finance minister Jim Flaherty also rejected the proposal, telling Sky News it was "not something we would be interested in in Canada".Canadian finance minister Jim Flaherty also rejected the proposal, telling Sky News it was "not something we would be interested in in Canada".
He added: "We are not in the business of raising taxes, we are in the business of lowering taxes in Canada. It is not an idea we would look at."He added: "We are not in the business of raising taxes, we are in the business of lowering taxes in Canada. It is not an idea we would look at."
Charity support
Russian Finance Minister Alexei Kudrin said: "I am a sceptic on such taxes. Gordon Brown is known for always raising taxes."Russian Finance Minister Alexei Kudrin said: "I am a sceptic on such taxes. Gordon Brown is known for always raising taxes."
Angela Knight, from the British Bankers' Association, said: "Tobin-type taxes don't work as they require perfect or near-perfect global implementation and assume no innovation.
"Banks are willing to discuss a better intervention mechanism, and more capital to be held as an insurance is already on the table."
A Conservative spokesman said that Mr Brown appeared to be "chasing headlines".
He added: "Six weeks ago Downing Street poured cold water on this proposal and the Treasury said it is unworkable - what has changed?
"Instead of empty headline-grabbing announcements Gordon Brown should focus on the crisis we are living through now which he helped to create, which means businesses are folding and insolvencies rising at record rates."
Although politicians have reacted against the new tax proposals, charities have expressed support for the idea.
Martin Hearson, ActionAid's tax expert, said: "A financial transaction tax is part of the solution, along with measures to help developing countries retain the revenues they lose to tax havens."
Meanwhile, a statement issued after the G20 meeting says the global economic recovery is "uneven" and remains dependent on support, while unemployment is a "major" concern.Meanwhile, a statement issued after the G20 meeting says the global economic recovery is "uneven" and remains dependent on support, while unemployment is a "major" concern.