'Nothing but a tax grab': Financial sector slams bank levy raise

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The $6.2 billion the Government will raise through a 0.06 per cent levy on bank liabilities has been met with predictable fury from across the financial sector.

Key points: bank levy

Key points:

  • Levy is forecast to raise approximately $1.5 billion per year over the next four years
  • Chairman of Bank of Melbourne says the levy was “a surprise, and not a welcome one”
  • Anna Bligh, head of ABA, says levy is an attack on jobs and growth

Chairman of the Westpac-owned Bank of Melbourne Elizabeth Proust says the measure is nothing but a tax grab from a sector that will be felt across the economy.

“I see the comments [from Treasurer Scott Morrison] that it’s not to be passed onto customers or consumers so presumably it comes from shareholders dividends,” Ms Proust told ABC’s The Business.

“It is a very large amount and taking taxation increases to a new level only on one sector.”

Bank executives who spoke to the program with anonymity were furious that the Government had not given any warning to the banks and that most had learned of it through leaks to the media.

They also pointed out that they will not be able to launch a campaign like the one mounted by the mining industry because the banking industry lacks the cohesiveness, let alone public support.

Those that the ABC spoke said there is no way the cost will not be passed on to customers in some way.

“There has already been a big fall in bank share prices before the details were fully announced so it will be an interesting day on the market on [Wednesday] for the banks.”

It does raise questions about who knew and when — given that the information was highly market sensitive and sent bank stocks plummeting on Tuesday.

‘It’s been coming for some time’

Anna Bligh, who now heads up the Australian Bankers Association, has said the levy is an attack on jobs and growth that will hit the millions of Australians who are customers or investors in the banks.

Former liberal leader Dr John Hewson said Treasurer Scott Morrison cannot make any guarantee that the levy will not be passed on.

“The banks always find a way to pass on cost increases,” he said, adding that the banks should not be so surprised by the measure.

“This has been coming for quite some time, the Government has been warning that the banks have a social license that they haven’t lived up to, the banks have done little in response and done nothing to change their culture,” he said.

“They report one large profit after another, and so the sector was an obvious candidate for this sort of tax increase.”

Banks are resigned to the fact that no-one will be in their corner to fight back against the levy.

“But when shareholders think about their returns, and anybody with superannuation will have some bank shares, they should have concerns about the likely reduction in dividends.”

Others praise the measure

Economist and former Rudd Government advisor Andrew Charlton says there are some solid economics behind the levy.

“The UK has a bank levy which is 8 basis points and they have two benefits to financial stability and competition.

“First because its applied to the biggest banks it helps to rebalance the market, and secondly because it applies inter-bank funding it encourages banks to fund themselves through more stable and less risky sources.”

As well as the bank levy the Government has announced a raft of measures designed to reign in bad bank behaviour.

It includes setting up a “more accessible and more affordable one-stop shop” for bank customers to resolve disputes with financial institutions, which will be called the Australian Financial Complaints Authority.

All senior bank executives will have to be registered with banking regulator APRA and if found in breach of a yet to be set up “Banking Executive Accountability Regime” they can be deregistered and disqualified from holding executive positions, and stripped of their significant bonuses.

There are also more hefty fines for bank bad behaviour starting at $50 million for small banks and $200 million for large banks.



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