Controversy on banking tax

The financial crisis demonstrated the urgency of global financial regulation reform. While it is widely agreed that there should be more transparency and higher standards in regulation the financial industry, countries have different mind-set on how to prevent future crisis.

EU leaders said they will push G20 partners to reach agreement on banking tax and financial transaction tax during the Toronto summit.

During the EU summit last week, leaders of EU members agreed to impose a banking tax, so that financial institutions will pay for their mistakes in the future instead of tax payers. EU said it will try to push for a global protocol under the G20 framework so that the new policy will not put European financial industry in a disadvantaged position.

But the proposal of banking levy has been rejected by Canada, the host of Toronto summit, and emerging countries like India and South Korea. Canada is expected to advance its position of no tax on banks during the summit.

Reform of international financial system

The economic crisis has had a significant impact on the developing countries and the most vulnerable. And governance reforms to enhance the credibility, legitimacy and effectiveness of the World Bank and the International Monetary Fund (IMF) have been on the G20 agenda.

It is agreed on the G20 Pittsburg summit last September that IMF will shift at least five percent of voting quota from advanced countries to developing and emerging countries. As the World Bank has completed a similar switch in April, which increased developing countries' voting power by more than three percent, details of IMF quota reform are expected to be discussed during the Toronto summit, with a view to meeting the November 2010 deadline for agreement.