Away from the clashes between police and protesters, looms a battle of a different sort – between Canadians trying to tax, regulate and rein in banks and financial institutions, and those who will do everything in their power to maintain the status quo.

There is little appetite in Ottawa these days for brave new ideas. But we don’t have to look too far back for inspiration. In 1999, then Finance Minister Paul Martin was ahead of the rich world in proposing that the Group of Eight Economies be expanded to include developing nations. The same year, Parliament voted to support the creation of a global tax on capital flows for international development. The first idea came to life as the G20. The idea of a kind of bank or financial happy new year 2018 images transaction levy on the other hand, is gaining ground everywhere – except in Canada.

<<G20 Protest car on fire

Calls to claw back from banks a tiny proportion of the money they make from modest wage-earners, have come from unexpected corners – but the response has been predictable. When Britain’s top financial regulator, Adair Turner, Chairman of the Financial Services Authority, proposed a global tax on currency trading to curb excessive speculation and executive pay, he unleashed a tumult of angry op-eds and pin-striped indignation. This is to be expected from the apologists of unfettered finance, for whom the idea of regulation and anything more than minimal fees are anathema.
But much of the criticism is based on faulty premises.

First, critics argue that traders would simply sidestep the tax, unless it is universally applied. Well, a 0.5% stamp tax is already applied in the United Kingdom. Far from losing investors to other markets, it’s the home of the London stock exchange, the largest in Europe.

Sweden for a short time imposed taxes on stocks and bonds before abandoning the policy. Investors did avoid fees by trading in alternative financial products, but that is the point: taxes were not applied to all financial products, so investors could trade in some, and avoid others altogether.

This is why for maximum effect, all of the major financial markets would have to impose a levy across the board. That’s not as outlandish as it may seem. In 1999, the Canadian Parliament led the way by passing a non-binding motion calling for a “Tobin Tax” on currency trades, named after the Nobel prize-winning economist who first mooted it in 1972.  Several countries, including France and Belgium, have since passed legislation to tax financial transactions. In 2004, more than 100 countries attended a UN Special Session urging action on a global levy.

The latest economic crisis has sparked renewed enthusiasm.  Paul Volcker, chairman of the Federal Reserve between 1979 and 1987, said recently he is “very interested” in ideas for a tax on transactions between banks – an idea floated recently by German Finance Minister, Peer Steinbrück. The French foreign minister, Bernard Kouchner argued for the tax to fund global development. And former British Prime Minister Gordon Brown, no economic adventurer, said the tax is “worth looking into.”

Sceptics fear the tax would dampen trade.  That’s highly unlikely. The figures being mooted would be in the order of 0.005% – or 5 cents on $1,000 – hardly calamitous.  Given the enormous sums traded every day, it could on the contrary raise considerable revenue. The nightmare scenario that traders would all pack up and go home is at best a fanciful one. There is simply too much money to be made for them to be frightened by a 5-cent dent. The transaction volumes in foreign exchange markets alone are immense. Even a microscopic tax rate of the more than $3 trillion traded internationally every day, could levy substantial revenues.

Critics go on to say fees would simply be passed on to consumers. This could be said of a tax on any business. Why not lobby then, for zero taxation everywhere?  Any tax would have to be coupled with rigorous regulation, which would punish efforts at offloading.  Everyone agrees that a more robust regulatory system is essential to keep a closer eye on the financial sector. A levy would be just one of several tools at the regulators’ disposal.

It wouldn’t negate the need for greater bank capitalization and less leverage, either. Far from it: a strong central regulatory authority would be better equipped to react to market swings and banking crises than governments were in 2008. While Canada’s economy weathered the global crisis well, it could still enjoy the benefits of a more progressive regulatory system now.

In the short term, the revenues raised from taxing capital flows could help pay down the national debt, and halt the sacrifice of social services. In the longer term, it could contribute to global funds for development, which the west has long promised the developing world, while delivering so little.

As the world’s economy recovers, the window of opportunity for decisive change will close. Let’s press our political leaders to embrace bold ideas. G-20 shindigs are as opportune an occasion as any, to get to it.

See my article on the Huffington Post.