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Flaherty stands firm against new bank tax

Finance Minister Jim Flaherty

Graham Hughes

Finance Minister Jim Flaherty is standing firm against a global tax on banks, an idea that has been winning popularity in other countries.

Canada is talking with other countries, hoping they will also oppose such a levy, Mr. Flaherty told reporters Friday.

"I think there's agreement in principle, certainly we had it among the G7 finance ministers at Iqaluit at the beginning of February," he said. "As I said on behalf of the group at that time, we agreed in principle that financial institutions that contribute to a financial crisis ought to bear the cost of their contribution to that financial crisis, and not taxpayers.

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The question now, the Finance Minister said, is how to accomplish that goal. While there are suggestions for different types of taxes, he added, "we're not in favour of that."

Canada's banks have stood out among their international rivals for how they withstood the crisis, and how sound the country's financial system is deemed to be among investors, and Ottawa has said repeatedly it is not in favour of a new levy.

Mr. Flaherty did not rule out the possibility of different approaches among various governments when all is said and done.

"We're not going to do in Canada steps like a tax on our banks or a tax on financial transactions," he said. "We have the soundest financial system in the world, according to the World Economic Forum, and we're not going to punish our banks for the fact that they have acted responsibly and maintained appropriate leverage during the course of the financial crisis."

He said Canada would maintain what he believes is a strong regulatory system, but "we do think steps can be taken about contingent capital, to make sure if there were a crisis later on that the resources would be there for the financial institutions to deal with them."

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