and other financial institutions. So far governments have tackled the problem of bank insolvency largely by transferring toxic assets to govern- ment entities, rather than by taking an equity stake. However, banks are still not lending money as they should and credit markets are still not functioning adequately. Governments should demand full transparency and loss recognition by the assisted banks, rather than relying on their ‘willingness’ to open their books.
Governments must take steps to protect and expand their tax bases so as to pay for the crisis in a fair manner. This requires a break with recent policies whereby direct taxation rates have been cut whilst indirect taxation – inher- ently more regressive – has increased. In addition, tax systems, including capital gains, should be reformed so as to strengthen financial stability and accountability. The G20 decision to tackle tax evasion and avoidance by increasing international cooperation on tax havens is a welcome step forward. However, there is a need to go much further. Taxation biases that favour debt together with regulatory arbitrage have combined to fuel the shadow financial system (structured products, hedge funds, off-balance sheet trans- actions) and to artificially subsidise investments, such as private equit , which otherwise simply would not have been sustainable. Introducing inter- national taxation for short-term financial transactions would curb excessive risk-taking and speculation by traders across all jurisdictions – thus ensuring a level playing field. It would also provide vital new funds for financing the public debt incurred as a result of the crisis and, where feasible, an increase in official development assistance. Just as the tax payers bailed out the banks, so it is time for the banks to pay their share in paying off the public debt.
24 We call on G20 Leaders to: Commit to full and effective implementation of all measures agreed at the G20 Summit in London;
Broaden the scope of the G20 Action Plan in line with the Global Unions’ eight-point plan for re-regulating financial markets;
Provide for full public accountability and transparency in the design and implementation of the bailout of the banking sector;
Take global measures on remuneration under a binding agreement that covers G20 countries, as well as Offshore Financial Centres (OFCs) and empower regulators to intervene, including by imposing higher capital requirements in the case of non- compliance. Swiftly imple- ment bonus ‘claw-back’ schemes so as to tackle reckless risk-taking. Remuneration should be aligned with long-term economic, social and environmental performance and capped in proportion to the median pay of the bank or company (e.g., by a ration of 1:20) and the overall revenue of the firm. Prohibit the cashing-in of bonuses and other performance-related schemes within five years;
Take the necessary measures to protect and increase tax revenues, including broadening the tax base and undertaking progressive taxa- tion reform that strengthens rather than weakens household solvent demand and meets social objectives;
Tackle tax arbitrage and tax biases that favour debt and fuel growth of the shadow financial system and improve cooperation on tax havens by supporting automatic systems of information exchange;