This article is discussing the proposal to establish a global tax on banks and the need to charge banks for the cost of government bailouts. The legislative body of the Group of 20 met to discuss this global tax proposal. The Group of 20 is an international gathering that meets to discuss economic issues. The G-20 members represent 19 countries some of which are with the world's biggest industrial and emerging economies, and this includes the European Union. The G-20 makeup 90 percent of the world's gross national product, 80 percent of world trade and two-thirds of total global population.
The G- 20 finance ministers and central bank governors discussed the need for the world’s big economies to synchronize changes in financial regulation. The International Monetary Fund endorsed this proposal to establish a tax on bank profits and executive salaries. Canada, whose banks withstood the crisis, is opposed to this idea. The Obama administration has proposed a $90 billion levy on banks that received the bailout money. The levy would be spaced out over the next 10 years. The absolute goal here is to get banks to hold more capital and prevent future economic disruptions. The bank tax would discourage banks from taking on too much risk and is addressing the public concern for privatized gains that create costs that affect everyone.
I don't think it would be wise to put a tax on bank profits because this will not give them incentive to loan and money and subsequently earn interest (which will result in higher profits and higher taxes). However, the need for executive pay reform has long been overdue. The amount of money that the CEOs and CFOs of this multi-billion dollar companies receive is ludicrous. If executives were to have a higher taxed on what they earned it would take away the incentive to potentially engage in risky activities/investments that may or may not result in a big pay off for the company (which would translate into a big bonus for the executives.)
ReplyDeleteOverall, I think the goal of G-20 is well-intentioned, just as mentioned in the article that it hopes to help prevent future economic disruptions. And the tax would make banks more cautious when they plan to take some risky financial activities. However, I was wondering what the policies of the global tax are. Whether it would levy the same rate to all the countries? In my opinion, it could make a system to estimate each country’ ability, and based on it to make different tax rate which will be more reasonable and justifiable.
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