Call For Australian Bank Super Profits Tax

by Mary Swire, Tax-News.com, Hong Kong

13 August 2010

The very large profits expected to be declared by Australia’s big four banks have led to renewed calls for a super profits tax on their income, on the same lines as the government’s proposed tax on the mining sector.

The Commonwealth Bank of Australia announced record net profits of almost AUD5.7bn (USD 5.2bn) in the year to end-June this year, an annual increase of 20%. National Australia Bank (NAB) also showed cash earnings increasing by 22% in its third quarter, while Westpac and ANZ are also expected to provide positive trading updates shortly. It has been estimated that the four largest Australian banks could earn up to AUD20bn this year.

In a television interview, Richard Dennis, the Executive Director of the Australia Institute, said that AUD3 out of every AUD100 earned in Australia is represented by the underlying profits of Australian banks. He concluded that it is necessary to reign in the banks’ fees and charges and, if nothing can be done through “well-designed regulation”, the idea of a super profits tax for banks “makes enormous sense”.

The Green party leader, Bob Brown, was also reported to have called for a super profits tax on the banks. The party has also promised that it will move to amend trade practice laws to ban Australian banks from charging fees for non-customers to use automatic teller machines (ATMs).

"Major banks should be banned from charging non-customers AUD2 every time they want to access their own money," Brown proposed. "It's a regressive private tax - that is, it hits the poorest people hardest. Australia's major banks all posted multi-billion dollar profits last year and they do not need to charge the approximately AUD680m they made from ATM fees.”

Last month, when the idea of a super profits tax on banks was last raised, NAB’s Chief Executive, Cameron Clyne, said that he felt that more taxes on the banks were unjustified. While the profits made by the banks were nominally large, his opinion was that they already pay fair amounts of tax. Excess profits were not being made, he added, by any measure of return on the huge amounts of capital they employ.

Recommended