The Canadian Press

Finance Minister Jim Flaherty said Thursday he has no plans to tax excessive bonuses handed out to bank executives, but warned Canadian bankers they must follow international guidelines on compensation.

Flaherty was responding to calls by Britain and France for a new international tax on bank bonuses.

In a column in the Wall Street Journal, British Prime Minister Gordon Brown and French President Nicolas Sarkozy wrote that a “one off tax” on bonuses is a priority since bank fortunes have risen mostly due to government largesse.

Flaherty said he will insist that Canadian bankers follow the newly-established rules set down by the G20 on compensation but that he won’t go so far as to create a new tax.

“We want to grow Canada as a financial centre; we don’t want to impose punitive taxes on anybody,” he said.

“This is not the United Kingdom, this is not the United States,” he added. “We did not have to bail out banks; we did not have to nationalize banks; we did not have to use taxpayers’ money to bail out banks in Canada.”

Nevertheless, the minister said he expects Canada’s bank executives to follow the new rules on compensation despite a report that bank bonuses will total a record $8.3 billion this year.

Flaherty wrote the banks in October warning that the new guidelines would apply in Canada even though the financial problems did not arise here.

He said the regulator, the Superintendent of Financial Institutions, is monitoring compliance with the G20 standards.

“We fully expect compliance, I don’t expect we will have non-compliance,” he said.

“But if we do then, through the regulator, certain steps can be taken,” said Flaherty, who was not specific about what actions could be taken.

The expected compensation for this year is 18% higher than 2008, but Nancy Hughes Anthony, president of the Canadian Bankers Association, noted that last year was a poor year for bank profits. This year’s compensation represents only about a 4% hike from 2007, she noted.

And she cautioned that the $8.3-billion estimate is for variable compensation throughout the system, not just for top executives.