The idea of a tax on financial transactions championed by France and Germany is unlikely to gain much traction at the next meeting of leaders of the world’s 20 largest countries because it faces opposition both within the European Union as well as from countries such as the U.S. and Canada.
French President Nicolas Sarkozy Thursday said the EU will propose a tax on financial transactions to the G-20 when it gathers at the end of next week in Toronto, stressing that France and Germany would work together to make this a “major issue” and are even ready to implement it without the support of others.
Sarkozy didn’t specify, however, what the proceeds of such a tax would be used for, but France has said in the past it favors using it to fund efforts to control climate change, foster innovation or fight poverty. Germany, on the other hand, sees such a tax as a way to curb speculation….
A person close to the IMF said the report to be submitted to G-20 leaders next week will mention the idea of a financial transaction tax, while making clear it isn’t the best way to make the banking sector cover the cost of future crises or to limit systemic vulnerabilities. The report will also point out the concern that the cost of such a tax would be passed on to clients, and that it doesn’t necessarily target the riskiest types of trades.