The U.S. and Europe will pursue levies on the financial system “in their own way” rather than through a common global tax plan, according to an aide to President Barack Obama.
The U.S. leader discussed possible bank fees and taxes in meetings today with French President Nicolas Sarkozy and German Chancellor Angela Merkel during a Group of 20 summit in Cannes, France, said Michael Froman, a deputy national security adviser. Euro-area nations favor a tax on transactions, while Obama has proposed a “financial crisis responsibility fee” to be paid by the largest banks.
“Both share in commonality the idea that the financial sector has an appropriate role to play in contributing” to the costs of crisis cleanup, Froman said. “I think there is broad consensus between the Europeans that the president met with this morning and ourselves about the ability of each to pursue this in their own way.”
Germany and France have led a push for global implementation of a financial-transaction tax that would extract revenue from banks and other firms. European supporters say a tax would raise revenue for climate change, poverty reduction and other budget needs as many nations grapple with fiscal austerity programs.
In September, the European Union’s executive arm proposed a financial-transaction tax that would take effect in 2014 and raise about 57 billion euros ($78 billion) a year. Bill Gates, chairman of Microsoft Corp. and co-chairman of the Bill and Melinda Gates Foundation, endorsed a transaction tax as one way to finance development in a presentation to the G-20 today.
The Obama administration says its crisis fee would not affect retail consumers. The EU proposal would not tax consumers directly; it also would not prevent institutions from passing costs of the tax on to their customers.
Sarkozy thanked Obama today for his “understanding on all matters,” including the levy. “I think we found common ground, at least common analysis, mainly that the world of finance must contribute to solving the crisis that we are all facing today.”
Two Democratic U.S. lawmakers, Senator Tom Harkin of Iowa and Representative Peter DeFazio of Oregon, also have backed measures to impose a transaction tax on financial firms that resembles the EU proposal. Those bills are unlikely to become law because Republicans, who have opposed such taxes in the past, control a majority in the House of Representatives.
‘Necessary International Consensus’
The EU plan also faces opposition. The U.K. government has argued that any tax can only be viable if applied worldwide and told banks in a letter this week that such support doesn’t exist.
U.K. Chancellor of the Exchequer George Osborne said it was clear after G-20 finance ministers met in Paris last month ‘that the necessary international consensus does not exist” to implement such a tax globally.
EU Tax Commissioner Algirdas Semeta is scheduled to present the tax proposal at next week’s meeting of EU economic and finance ministers in Brussels. The proposal hasn’t changed since it was announced in September, EU spokeswoman Emer Traynor said.
The American Chamber of Commerce to the European Union voiced “strong opposition” to the tax, saying all consumers would be affected and the overall impact would be to decrease EU financial activity, leading to lower-than-expected revenue. “This is a risky strategy that could undermine Europe’s financial sector at a very critical time,” the group said in a press release yesterday.