The Canadian Press

Canada will not impose new taxes on banks or financial transactions and will try to convince European leaders of the folly of their proposals at the upcoming G8 and G20 near Toronto in June, Finance Minister Jim Flaherty said Monday.

Instead, Flaherty said the world should follow the Canadian example that kept banks solvent during the financial meltdown by ensuring financial institutions have enough capital to withstand crises.

The minister made to comments to reporters after a speech to New York’s financial movers and shakers in which he credited the Canadian approach to regulation for the country’s relatively strong fiscal and financial position.

Flaherty was scheduled to arrive in London on Tuesday, on a mission to sell Canada as a relative safe harbour for investment in a world sinking in debt.

He said he has received a lot of positive views from New York’s financial sector about Canada’s sound banking system and about the low debt ratio, which is now the best in the G7 group of advanced nations, after years near the bottom.

Flaherty had no hesitation in saying European proposals to tax banks and financial transactions – a micro-charge on the millions of millions of transactions that occur – was a mistake.

“We’re not going to impose a tax on financial transactions,” he said, according to transcripts of the news conference.

“We’re not going to impose capital taxes on our financial institutions. We’re against raising taxes and I hope to be able to convince my colleagues that these are unwise moves.”

Flaherty said he’s been told that the U.S. government also would not act in concert with Europe.

Canada’s banks avoided the problems and bankruptcies that occurred elsewhere because they were better capitalized – had greater resources to outstanding debt – and others should follow the same prescription, he said.

Still, he was not ruling out ensuring that financial institutions pay for mistakes they make.

He said in the future, banks that contribute to financial crises should bear the cost, “the proportionate cost of their contribution to the crisis rather than taxpayers.”

Flaherty also made it clear that he believes the U.S. and others should move to regulate any function of an institution behaving like a bank, including the murky world of hedge funds and derivatives.

“It’s not that hedge funds ought not to be, it’s that to the extent they act like banks they need to be regulated,” he said.

Flaherty would not comment directly on a White House proposal to create a multi-billion fund that would be used to bail out financial institutional failures in the future.

But when asked by U.S. lawmakers on the efforts to reform health care in the U.S., Flaherty did offer some advice.

He said there are “terrific benefits” to Canada’s universal system, but also challenges. He said a key to any reform is to ensure there is an element of competition in the system to control costs.

Flaherty said many in the U.S. believe there is no competition in the Canadian system, but he pointed out that about one-third of health care services are delivered by the private sector.

Flaherty also told reporters he believes there are signs of a restoration of business confidence in both the U.S. and Canada that should benefit both countries’ economies going forward.

And he again dismissed the suggestion that Canada is experiencing a housing bubble, despite a report from the Royal Bank showing a slight increase in household debt due to large mortgage requirements.