Australia’s banking sector reacted with fury on Wednesday to a government plan to slug lenders with a hefty new levy, calling it a “naive” tax grab that sent the wrong signal to global financial markets.
The move to raise Aus$6.2 billion (US$4.5 billion) over four years through a 0.06 percent charge on the borrowings of the big five banks — ANZ, Commonwealth, Macquarie, NAB and Westpac — was a key plank of the federal budget on Tuesday.
Treasurer Scott Morrison said the lenders could afford to pay, and the cash would help with budget repair and a raft of spending on infrastructure, health and schools.
“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,” he said.
Morrison warned the banks — some of Australia’s most profitable companies — not to pass on the hit to customers as it did not apply to mortgage or deposit accounts.
“If they do, take your money somewhere else, take your money to a regional or smaller bank,” he said.
Rumours of the new tax sent bank shares tumbling on Tuesday, wiping Aus$14 billion from their value, and the sharp falls continued Wednesday.
Business Council of Australia chief executive Jennifer Westacott called it a “worrying policy precedent”.
“The banking levy effectively represents double-taxation of some of Australia’s most successful companies, which already pay Aus$11 billion in company tax each year, employ about 130,000 Australians and contribute to the superannuation (pensions) of millions more,” she said.
Australian Bankers’ Association chief executive Anna Bligh blasted the decision as “a political tax grab to cover a budget black hole”.
“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,” she said.
“It is naive and misguided and has already sent the wrong signals to global financial markets about the strength and stability of our banking sector.”
Bligh said there had been no consultation with the industry and warned “it should make every company in Australia which earns more than banks wonder who’s next”.
The government has in recent years faced calls for a national inquiry into the banking sector, which has been dogged by allegations of financial planning fraud and claims of manipulating reference rate benchmarks.
As part of the budget, Canberra said banks could face penalties of up to Aus$200 million if their staff were caught ripping off customers, while regulators were handed more money to better police them.