The False Promise of Crisis-Resolution Funds
Ever since financial markets began to stabilize late last year, the idea of making the financial sector pay for the costs incurred by taxpayers to keep it afloat has gained increasing support among policymakers and the wider public. But the idea of a resolution fund is at best a distraction – and at worst a harbinger of further financial instability.
ROME – Ever since financial markets began to stabilize late last year, the idea of making the financial sector pay for the costs incurred by taxpayers to keep it afloat has gained increasing support among policymakers and the wider public. France and the United Kingdom have introduced a temporary tax on financial-sector bonuses, and the United States government has proposed legislation envisaging a “financial crisis responsibility fee” to recover the costs of America’s Troubled Asset Relief Program. There is also a discussion about how best to reform taxation of the financial sector, which is on average lighter relative to other corporate income and unduly favors borrowing over equity financing.
ROME – Ever since financial markets began to stabilize late last year, the idea of making the financial sector pay for the costs incurred by taxpayers to keep it afloat has gained increasing support among policymakers and the wider public. France and the United Kingdom have introduced a temporary tax on financial-sector bonuses, and the United States government has proposed legislation envisaging a “financial crisis responsibility fee” to recover the costs of America’s Troubled Asset Relief Program. There is also a discussion about how best to reform taxation of the financial sector, which is on average lighter relative to other corporate income and unduly favors borrowing over equity financing.