IMF wants two big new taxes on banks
I have in my possession a copy of the IMF's eagerly awaited paper for governments on how the banks should be made to pay for the costs of future financial and economic rescue packages.
And I have to say that the proposals - which have been sent to IMF members in the past few hours - are more radical than I anticipated.
In the paper called "A Fair and Substantial Contribution by the Financial Sector" PDF (which rather gives the game away), the IMF argues the case for two new levies to be applied in as many countries as possible:
1) A "financial stability contribution" to pay for "the fiscal cost of any future government support to the sector". The levy would be paid by all financial institutions, not just banks, initially at a flat rate but eventually refined so that riskier institutions paid more.
2) A "financial activities tax", which would be levied on the sum of financial institutions' profits and the remuneration they pay.
The proposals are likely to horrify banks, especially the proposed tax on pay.
They will also be politically explosive both domestically and internationally.
Labour is bound to claim that the IMF is implicitly criticising the Tories' plan to impose a new tax on banks irrespective of what other countries do - because the IMF paper says that "international co-operation would be beneficial" and that "unilateral actions by governments risk being undermined by tax and regulatory arbitrage" (the danger that banks will relocate to countries where the tax doesn't apply).
I would also start to question my sanity if Gordon Brown doesn't claim credit for putting pressure on the IMF to launch its review of possible bank taxes.
All that said, the Tories will say their tax resembles the Financial Stability Contribution.
And the LibDems are bound to claim that their proposed tax on banks' profits isn't a million miles from the IMF's profits-plus-pay levy.
Internationally, there will be dissenters. Canada is opposed to any new bank taxes.
And although the Americans have adopted a tax to pay for past bailout costs, it is by no means certain they would want the second financial activities tax.
That said, the IMF paper represents a big step along the way to a new levy or levies on banks everywhere.
I would make three other points.
The IMF would mildly prefer the so-called financial stability contribution to go into a discreet bailout fund rather than into general government revenues.
By contrast, Labour, the Conservatives and the LibDems all want the proceeds of any new bank tax to be available for general government use.
Also, the IMF favours a bold associated reform, which would be to limit the tax deductability of interest, to make debt more expensive and discourage banks, financial institutions and other companies from taking on excessive debts.
George Osborne, the shadow chancellor, has talked about such a reform, but is not committed to it.
Finally, insurers, hedge funds and other financial institutions less implicated in the recent financial and economic crisis would be disheartened that they would have to pay the new taxes.
But the IMF argues that if they were excluded, lots of activities currently carried out by banks would reinvent themselves as insurance or hedge-fund services, for example, to escape the levies.