Not only did Canadian opposition to a global bank tax blindside at least one European country, but experts and diplomats say as host of the G20 summit in June, Canada could seriously challenge efforts to implement uniform international financial regulations.

British Prime Minister Gordon Brown said at the beginning of February that the world's leading economies were close to agreeing on a global bank tax, even hoping a deal could be concluded at the summit in June.

Just over a week after that announcement, newspapers in this country reported Canada was opposing efforts to create a global bank tax, and will instead use its influence as the G20 host to push for a stronger regulatory system for banks.

"We will oppose the creation of a new global tax or any tax on financial services and transactions," one official was quoted as saying.

"We were definitely taken aback by this, especially in light of the good momentum we built in Iqaluit," said one European diplomat, who spoke under condition of anonymity this week.

During a meeting on Feb. 6 in the Nunavut capital, G7 finance ministers agreed to look at various proposals for making banks cover the costs of bailouts. At that time, Finance Minister Jim Flaherty said: "We should let financial institutions bear the costs of their contribution to those crises."

Details about how exactly a global bank tax would work remain very vague. In fact, the terms to describe such an international measure range from a global bank tax to a financial transaction tax or Tobin Tax. All have a somewhat different purpose, making the debate a complex one.

French Ambassador François Delattre said Canada has an important weight on all issues, but has particularly strong leverage this year as the president of the G8 and host of the next G20 summit.

"Canada was not the most enthusiastic country in favour of such a tax," Mr. Delattre said. "If you have one major player being fiercely against it, that would be difficult to implement. But there is an in-depth discussion with our Canadian friends and we hope to have them on board on what seems to be such a great idea."

The main idea behind this tax is to curb speculation, which has been one of the main causes of the financial crisis—and Canada should not reject it so easily, said NDP Finance Critic Thomas Mulcair.

"I think it's unfortunate the Conservatives are refusing this proposal without assessing its feasibility. This issue is complex, and we should recognize there are very complicated feasibility issues, but it doesn't mean we shouldn't be trying to get to the root cause of this crisis.

"[The Conservatives] just love to say how well Canada's banks have done compared to others...but the question is how do we come to grips with complex economic tools that are causing the problems in the world."

The decision not to be "in sync" with other major financial players may have deep implications, experts say.

"If some countries adopt a transaction tax and others don't, countries that do have the tax may want to 'level the playing field' by somehow penalizing financial players in countries that don't have a tax, which could trigger a large trade and investment dispute," said Daniel Schwanen, senior economist and deputy executive director of programs at the Centre for International Governance Innovation.

The Financial Stability Board, one of the G20's working groups, is in the midst of developing common rules for the amount of capital banks should have. The International Monetary Fund is also expected to present a paper with financial tax options ahead of the G20 summit in June.

The Tobin Tax, one of the options sometimes quoted, is a tax on currency transactions. It is meant to manage exchange-rate volatility, especially for short-term financial operations. This, however, has not been a very popular measure among the major players ever since the beginning of this discussion.

Another option, the financial transaction tax, could raise revenue from securities' trading or stock exchanges, and it would not apply solely to banks, but also to companies and individuals dealing with investments, said Rodney Schmidt, principal researcher in the finance and debt section of the North-South Institute, a non-governmental organization focused on international development issues.

"If this happens, it would be the first time you would see a global co-ordinated implementation of a financial tax," Mr. Schmidt said. "Clearly, from a technical point of view, Canada's opposition would be a problem if the intention is to have a general tax across the G20."

South Korea, which is co-hosting the G20 summit this year, has also expressed its opposition to the tax.

The basic argument in favour of a financial transaction tax is to tackle the effects of the very fast speed at which capital can flow across borders, and which can sometimes destabilize some countries, as happened in Asia in 1997.

Those advocating in favour of this tax are saying that there should be a cost to this potentially harmful quick turnover of capital, Mr. Schwanen said. Even at a very low rate, the tax would make banks and companies think twice before moving their capital, he added.

Mr. Schwanen also recognized the importance of consensus on this issue.

"Any tax measure affecting such a mobile sector as finance would be more effective in terms of its desired impact on global stability if it was universally supported by significant players," he said.

In terms of revenues raised from the tax, some suggest an insurance fund in case of another crisis, while the French suggest using the revenue to fund UN Millennium Development Goals.

Mr. Delattre said that three or four years ago, the tax idea was seen as a "socialist idea," whereas today it's at the core of the debate of G20 experts.

"Many countries who initially opposed it are now in a 'think-twice' mood," he said.

Canada's banking sector was not as severely hit during the recession as that of other major countries, which would explain Canada's push for a stronger global regulation system in this area.

"We came out smelling relatively like roses, why would we tax our financial activity?" Mr. Schwanen said. "Why would be bargain away that advantage? Why not use the Canada brand as a way to gently remind countries that there are different ways of dealing with this?"