France, Germany want bank tax on G20 agenda

French and German leaders formally called on Canadian Prime Minister Stephen Harper Tuesday to put their proposal for a bank tax on the agenda for the G20 summit in Toronto that opens June 26.

French President Nicolas Sarkozy and German Chancellor Angela Merkel wrote in a joint letter to Harper that their governments "call for an international agreement to introduce a levy or tax on financial institutions to ensure fair burden-sharing and create incentives designed to contain systemic risks." 

Earlier Tuesday, finance ministers from the U.K., France and Germany outlined their proposal for the tax, a measure the Canadian government has opposed.

Canada's banks were quick to voice opposition to the proposal.

The fee would raise funds to shield taxpayers from the cost of bailing out banks during the financial crisis. The U.K., France and Germany are proposing other countries join them in enacting the tax.

An international tax on financial transactions is not a substitute for effective bank regulation, the Canadian Bankers Association said in a release.

"What is important is stability in the financial sector and good risk management," it said. "You don't get this by imposing a tax on financial institutions."

"Those who are in favour of a tax on financial transactions see this as a way to recoup the costs of bank bailouts in other countries and curb speculative behaviour," the association said. "It doesn't seem fair to make the customers and shareholders of financial institutions throughout the world fund the bailouts of a handful of financial institutions."

In a joint statement, the three countries say financial institutions should make "a fair and substantial contribution" to reimbursing governments for bailing out banks in the wake of the global economic crisis.

Harper opposed

Canadian Prime Minister Stephen Harper has repeatedly said a bank tax is not necessary for Canadian financial institutions, given the strength and stability of banks here.

A statement released by Berlin's Finance Ministry said the taxes imposed by the three European countries would all have the same goal.

"All three levies will aim to ensure that banks make a fair contribution to reflect the risks they pose to the financial system and wider economy, and to encourage banks to adjust their balance sheets to reduce this risk," read the proposal.

Germany declared its intention for such a tax in March and is drafting legislation to go to parliament before the summer recess, while the U.K.'s Treasury chief George Osborne announced its version on Tuesday. France said it will present the details of its bank tax in the coming budget.