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Prime Minister Stephen Harper addresses the assembly on the second day of the World Economic Forum (WEF) annual meeting on Jan. 28, in Davos, Switzerland.FABRICE COFFRINI

The Harper government is pushing back against Britain's efforts to win support for a global levy on financial institutions, a political decision that drew applause from Canada's banks, yet risks creating discord within the Group of 20.

In a message aimed at British Prime Minister Gordon Brown and other European governments, Canadian officials speaking on the condition of anonymity told news organizations - starting with London-based reporters for The Wall Street Journal - that Canada would amplify its opposition to a bank levy in the days ahead.

The British leader, irritated Canadian officials by suggesting this week that there's a consensus forming around a proposal that Prime Minister Stephen Harper and Finance Minister Jim Flaherty have stated they oppose.

Mr. Brown repeated yesterday that he hoped the G20 would endorse his call for an international levy that would curb the excesses that led to the financial crisis. He has support: Dutch Finance Minister Wouter Bos said earlier this week that "almost" all of the EU finance ministers agree there will be a "form of banking taxation."

As the co-chair of the G20, Canada is in a stronger position than it might otherwise be to take a stand against a bigger economy that wields far more influence.

"Canada will not be supporting the introduction of a new global tax on financial services and urged countries instead to adopt sound regulatory practices like Canada's," the Harper government said yesterday in internal talking points distributed by the Prime Minister's Office. "Modest and responsible regulation is the answer, not taxation."

Mr. Harper is operating on the assumption that the G20 can only operate on consensus, and therefore cannot proceed without full participation.

Canada's steadfast opposition also is a serious blow to the initiative's supporters because even Mr. Brown concedes that all of the world's major financial centres would have to implement a levy for the plan to work. Holdouts would become havens to which banks could flock, defeating the purpose of using the tax code to restrict financial institutions' behaviour.

Momentum for a global tax has picked up as more countries seek to recoup the costs of financial rescues with domestic measures, including the U.S., a country more apt to cut taxes than to raise them. The G20 last year asked the International Monetary Fund to study the question and the fund is scheduled to report back in April.

"It's not a radical idea any more," said Eric Helleiner, who studies financial regulation at the Waterloo, Ont.-based Centre for International Governance Innovation.

But Mr. Harper and Mr. Flaherty have been consistent in their position that there is no reason for Canada to follow because none of its banks needed a bailout. Those banks applauded the stand yesterday.

"The government has been quite clear in praising the financial industry in Canada for being very prudent, for not requiring bailouts," said Nancy Hughes-Anthony, president of the Canadian Bankers Association. "So what is the justification for such a tax?"

With files from Tara Perkins and Bloomberg News

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