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Australian Banks Criticize New Levy

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

10 May 2017


The Australian Bankers' Association (ABA) has condemned the Government's proposed new levy on the country's five largest banks as a "direct attack on jobs and growth."

In his 2017 Budget, Treasurer Scott Morrison announced a six-basis point levy on Australia's five largest banks with liabilities of more than AUD100bn (USD73.7bn). Customer deposits of less than AUD250,000 and additional capital requirements imposed on the banks by regulatory authorities will be excluded from their assessed liabilities.

Morrison said: "This represents an additional and fair contribution from our major banks, is similar to measures imposed in other advanced countries, and will even up the playing field for smaller banks."

The levy will enter into force on July 1. The Government expects the measure to raise AUD6.2bn over the forward estimates period.

Responding to the announcement, Anna Bligh, Chief Executive of the ABA, said: "It is a tax that will hit Australians by hurting investment and could have unintended consequences. Contrary to the Government's claim that the tax will only be levied on banking liabilities, the reality is that it will affect the entire banking system."

Bligh added it was disappointing that the Government had not consulted with the industry on the new tax.

According to Bligh, banks are the largest corporate taxpayers in Australia. She said: "In 2016, banks paid around AUD11.5bn of income tax. This new tax represents in the vicinity of a 10 percent increase in tax."

She argued that "banks are not unusually profitable," and said in 2016 the average return on equity of Australia's four major banks was just under 14 percent. This "ranked them around the middle of the returns of the top 50 listed companies," she explained.

Morrison has defended the measure in his post-Budget interviews. Answering questions on WSFM radio as to whether the levy would be passed on to customers, Morrison said: "Well this is a very small levy on the banks: its 0.06 of a percent. So if banks are going to go around and hit their customers, then what they'll be doing is what they want to do anyway and I think that would be a very dishonest thing for the banks to do, and I think that would just confirm in everybody's minds why they're so angry at the banks."

TAGS: tax | investment | banking | Australia | tax rates | tax reform | trade association | trade

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