ROME - The International Monetary Fund is studying a wide range of possible ways to impose a levy on banks, including taxes on profits, assets and financial transactions, its chief economist said on Friday.
But Olivier Blanchard stressed that the IMF, which has been asked by the Group of Twenty leading nations to explore the issue, aimed to ensure any levy did not stymie a recovery in lending by financial institutions.
Some possible levies could recoup part of the billions of dollars of taxpayers' money ploughed into banks to prevent them from failing during the global financial crisis, Blanchard said in an interview.
At this stage we are working on many options and these include a Tobin-like tax on transactions and taxes looking at the past to see if there is any way of getting the money back: taxes on past profits or taxes on assets, he said.
Blanchard's ultimate boss, IMF managing director Dominique Strauss-Kahn, told Reuters on Sunday that the fund was not working on a so-called Tobin tax on financial transactions, because such a tax would risk being unworkable.
However, Blanchard said a Tobin tax was still being studied on a purely technical basis, despite opposition to the tax from some nations, notably the United States.
We all understand that a Tobin tax is going to introduce some distortions...Will people find a way of avoiding it altogether though? he said.
It may make sense to have some kind of tax, but we have to be careful when we do this that we don't squeeze the capitalisation of banks, and so delay lending by another six months, he said. We can't just take the money and run.
The IMF is also looking at the possibility of levying insurance fees on banks; the fees could be used to build up funds that would conduct future bank rescues, relieving taxpayers of the burden.
Then there is the much more important question of how do we do it in the future? Basically, taxing firms for the risk they impose: some form of 'insurance premia', Blanchard said. Whether we call these insurance premia or taxes is only a matter of semantics.
The IMF is due to present a first report on possible bank levies to the G20 in April. A lack of consensus among governments on how to structure and apply taxes may still prevent the G20 from adopting any levy.
But momentum towards a levy appeared to increase last weekend when British Prime Minister Gordon Brown, speaking at a G20 meeting in Scotland, shifted position and explicitly backed consideration of some form of tax.
Blanchard said there was no longer a risk of a global economic catastrophe, but there were many threats to economic recovery.
It doesn't look like there are major catastrophes at a world level waiting to happen but unemployment is still increasing, growth is still weak, the recovery is going to be tough, the fiscal situation of some countries remains extremely tough.
He added, Europe is doing better than was forecast. The other question is how sustainable it is...It looks like the next few quarters will be better than we thought just a few months ago.
Official data released on Friday showed the euro zone's economy expanded slightly in the third quarter of this year after five consecutive quarters of contraction.
(Editing by Ron Askew and Andrew Torchia)