The IMF is proposing new global taxes on banks, a step that is likely to provoke dismay among the banking industry, media reports said.

Already hit by one-off taxes in some nations eager to fill yawning budgetary black holes, the world’s banking system may face the prospect of global taxes as proposed by the International Monetary Fund, media reports said.

Under the IMF proposals, all institutions would pay a bank levy - initially at a flat-rate - and also face a further tax on profits and pay.

Reports did not elaborate on the definitions that governments would use to stipulate what kind of institution would be liable for a tax – such as whether the firms to be taxed would have to be deposit-taking institutions.

Although the proposals may never come to fruition – there have been a number of attempts to agree on global taxes in the past such as the Tobin tax idea – the fact that the IMF is putting its weight behind such an idea highlights how politicians and regulators are looking at banks as a key revenue source. The timing of the IMF proposals is politically sensitive: taxes and banking have been issues in the UK general election. In the US, the sharp rise in bank profits and bonus payments at firms such as scandal-hit Goldman Sachs is also a sensitive issue.

One debating point in judging any bank tax is the issue of what economists call tax incidence, which describes how a tax levied on any specific institution has effects that spread far wider than the institution, in the form of higher prices to consumers, weaker savings rates and lower profits.

As argued in WealthBriefing recently, proposed taxes on banks' currency trading could, for example, force customers to pay a less attractive rate for buying foreign exchange and cut into the returns of investors holding affected portfolios. 

The IMF documents have been seen by governments of the G20 group of nations yesterday and their plans are due to be discussed by finance ministers at the weekend.

To view the recent WealthBriefing article on bank taxes, click here.