India has not agreed to a “one size fits all” solution in the European Union Plan of taxing banks and has emphasized that such a tax is not appropriate for India, even though it may be appropriate for other countries e.g. in some European countries.
In the G20 meetings, India did not agree to the banking sector tax in India as our banks are strongly regulated, we did not have to bail out our banks using tax payers’ money during the recent financial and economic crisis, and we already have other measures such as a statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) that impose costs on the financial sector. We have emphasized that we will persevere with a path of financial sector reforms to support rapid and inclusive growth in the real economy, and also increase systemic stability in the financial sector.
Several other countries inter-alia including Australia, Canada, and Brazil also held the view that “one size fits all” cannot be the solution. The G-20 finally agreed on the principle that tax payers should not pay for the cost of rescue of financial sector. However, it also agreed that there are a range of policy options to achieve that and the exact mechanism should be based on country circumstances.
This information was given by Minister of State for Finance, Shri Namo Narain Meena in a written reply to a Question in Lok Sabha today.