India has opposed levying any tax on banks to mop up funds for managing financial turmoils and organising bailouts in future, the likes of which were put in place by some of the developed economies in the wake of the global financial crisis.
At a meeting with Presidential Committee Chairman (for the G-20 meeting) Il Sakong at Busan (South Korea) on Friday, Finance Minister Pranab Mukherjee made it clear that instead of a tax on banks, India would prefer a regulatory mechanism as was in operation in the country.
An official statement here quoted the Finance Minister as saying that “India is not in favour of posing any tax on banks, rather it is in favour of regulatory mechanism as being followed by Indian banks.”
With Australia and Canada also opposing the bank tax proposal which was put forward by the European Union last month and supported by the U.S. and the U.K., the G-20 meeting of finance ministers is unlikely to arrive at a consensus on this contentious issue.
The differences over the bank tax proposal have cropped up because the fallout of the global turmoil did not impact the financial systems of India, Australia and Canada in the same way as it did in the U.S. and some of the EU countries.
With many of the European economies saddled with huge public debt owing to increased public spending during the crisis years of 2008 and 2009, the levy on banks is aimed at sparing taxpayers from chipping in for bailouts in future.
During their “fruitful and positive” bilateral meeting on the sidelines of the G-20 Finance Ministers meeting ending on Saturday, both Mr. Mukherjee and Mr. Sakong stressed that the focus of G-20 on all round compressive development would continue despite the debt crisis and other financial problems being faced by various developed economies.
The two leaders also hoped that the crisis in Europe would be discussed at the meeting and that a comprehensive package being prepared would be sufficient to contain any further extension of damage. “The G-20 will be able to play a major role in recovery of various countries' financial crisis and it will reflect change in balance of power. This is all the more relevant as various advanced and developed economies have failed to resolve their financial problems on their own,” they said.