IMF proposes global bank tax

A leaked report from the IMF (Internatioal Monetary Fund) has proposed two new global taxes should be levied on financial institutions to pay for possible future financial crises.

A Financial Stability Contribution, would be used to create a fund to help pay for any future government support. The second tax, called a Financial Activities Tax or FAT, would be levied on pay and be based on both the profits and remuneration of financial institutions.

The IMF prpposes that the Financial Stability Contribution should be applied on bank balance sheets, specifically their liabilities, to stop banks becoming "too big to fail". Each country should aim to raise between 2% to 4% of gross domestic product over the long term.

Given intense political pressure in many major economies to claw back some of the huge state bail outs during the financial turmoil of 2009 and prevent future failures it is likely that some form of tax will be agreed by global leaders. The eventual size of the tax contributions needed by financial institutions will dictate the impact on their future earnings. However, they are unlikely to be of such a size to trouble shareholders unduly.