The International Monetary Fund's (IMF) proposal to establish a global tax on banks, to reduce the likelihood of future crises, suffered a set-back as the meeting of the finance ministers of G-20 countries could not agree on it.
"There was not agreement on a global bank tax," Canadian Finance Minister Jim Flaherty told reporters after the meetings.
"Some countries are in favor of that. Some countries quite clearly are not. It depends whether a country has had to use taxpayers' dollars to bail out banks, for the most part," Flaherty said.
In its proposal, the IMF had argued that its proposal to impose broad taxes on the financial industry would reduce the likelihood of a future crisis.
"Our belief is that the tax system can help to reduce the likelihood of future crises along with regulation, of course. Taxation will not do everything by itself, regulation has its role to play," IMF Managing Director Dominique Strauss-Kahn had told reporters at a news conference on Thursday.
G-20 is the group of twenty finance ministers and central bank governors, established in 1999, to bring together important industrialised and developing economies to discuss key issues in the global economy.
Following the G-20 meeting here today, which was attended by the Indian Finance Secretary Ashok Chawla, the US Treasury Secretary Timothy Geithner acknowledged that despite best of efforts, it could not push for the tax, though there was significant support for it.
"We are trying to establish the basic principle that, where governments are exposed to risk and putting out financial fires like this, taxpayers don't bear the burden of paying for the costs of those actions," Geithner said.
The Obama administration has proposed in the US a fee on risk, that would be paid by the largest banks over time, to cover the costs of emergency financial rescue.
"That is a simple, fair and basic imperative," he said.
"As you've seen, there is significant support among the other major economies -- not all, of course -- for taking similar actions. And the IMF gave us today -- or last week -- a very thoughtful paper that examines alternative ways of achieving that objective and that was helpful," Geithner said.
"We're going to move in the United States, because we think this it is the necessary thing to do. And I suspect you're going to find, when countries see what we do and they're going to wait to see exactly how we do it in the US -- I suspect you'll find other countries adopting, moving to adopt, similar measures," he added.
