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10 November 2009

Brown seeks support for “Tobin tax”

PM secretly tries to persuade bankers to support transaction tax, while EU ministers express interes

By Staff Blogger

Gordon Brown is reportedly trying to persuade top City figures to speak out in support of his plan for a new international tax on banking.

Although the so-called Tobin tax has been furiously opposed by lobbyists, and criticized by the US, Canada and Russia, the prime minister is convinced that there are a significant number of senior bankers who could support it.

This support would give Brown the support of business opinion as he lobbies world leaders to adopt the tax.

The tax, on big financial transactions, could be used to control City behaviour and finance a bailout fund. It would raise tens of billions of dollars, reducing budget deficits caused by the financial crisis. It would also help to finance the developing world.

Yesterday, he drew cautious support for the plans at a meeting of eurozone finance ministers. Joaquin Almunia, European financial commissioner, said: “There was some curiosity about Gordon Brown’s proposals surrounding a financial levy”.

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Almunia said that the group has “agreed to discuss this again in the coming months”, although he said that Brown himself had stressed the need for a “global position” to avoid disruptions to capital flows.

Elena Salgado, Spanish finance minister, said that the idea was like an environmental tax “where the polluter has to pay” and a “kind of insurance” against future failure of the system.

US treasury secretary Tom Geithner had previously brushed off the proposal, saying: “No, that’s not something we’re prepared to support”. However, Brown is now working to get the International Monetary Fund (IMF) to back the tax.

There are signs that some city brokers are not completely against a transaction tax, believing that it is technically possible to collect. Two years ago INTL Global Currency, a foreign exchange broker, successfully trialled a transaction levy software system for two weeks. Director Philip Smith said: “It was easy to implement.”

Ethical Currency became the first City foreign exchange broker to voluntarily adopt the Tobin tax two months ago.

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