The SA budget today contained a surprise. They plan to charge a 0.015 per cent levy on the major banks bank bonds and deposits over $250,000 but will exclude mortgages and ordinary household deposits.
The tax to be introduced 1 July is expected to raise $370 million over four years.
At it represents SA’s estimated share of bank liabilities subject to the Commonwealth’s quarterly levy, and the state treasurer cited the profitability of the banking sector and suggested that they have not been doing right by their customers.
So now the risk will be other states following suite. The banks are an easy target, profitable and unpopular; but we need to be aware of the unintended consequences of this move. Once again it is likely the costs will be passed on the bank customers, as the tax will lift the banks treasury costs, so this becomes an further indirect tax on consumers, just rather well hidden. And “convenient”.
The ABA responded:
Sydney, 22 June 2017: A new proposed tax on five Australian banks by the South Australian Government is an outrageous cash grab without policy substance, the Australian Bankers’ Association Chief Executive Anna Bligh said today.
“States are not responsible for banking policy. There is absolutely no policy reason for this announcement, other than a need for the South Australian Government to raise revenue in a desperate political move,” Ms Bligh said.
“Let me be clear – it is not the job of banks to prop up government budget shortfalls.
“South Australia is a state that needs economic confidence – at 6.9 per cent it has the highest unemployment rate nationally. Today’s announcement is the worst possible signal to the business community in South Australia and will make South Australia less competitive, potentially driving jobs to other states,” she said.
“This announcement is staggering for a group of Australian banks that are already among the highest corporate tax payers.
“These are banks that provide jobs for South Australians, lend to South Australian businesses and help South Australians into their homes.
“Tax policy in Australia is now becoming a joke at the whim of political opportunism and South Australia is trying to impose triple dipping for bank taxation,” Ms Bligh said.
“The banks impacted by this proposal pay full corporate tax, the Federal Government has just passed a new bank tax and now the South Australian Government is trying to impose a third state tax.
“The impacted banks call on every Australian Premier and First Minister to rule out a similar tax.
“Furthermore, when the GST was introduced, a range of state taxes were eliminated, including some state taxes relating to financial institutions. Today’s announcement is a step back in time.”
ANZ Chief Executive Officer Shayne Elliott today responded to the South Australian Government’s announcement of a new state-based bank tax.
Mr Elliott said: “This deeply concerning tax will likely impact business investment in South Australia at a time when its economy is struggling with low growth, low business confidence and high unemployment.
“All businesses will rightly question the political risk associated with investing in a State with a Government prepared to unfairly target an industry that has played a significant role in supporting its lagging economy.
“South Australia does not need another drag on its economy after the repeated power failures over the last few years. Given its issues they would be wise to be more welcoming of both investment and capital,” Mr Elliott said.
“The comments attributed to the State Treasurer show a clear lack of understanding of the role banking plays in supporting the South Australian economy and the damage that opportunistic and ill-considered cash grabs will have on the long term economic prospects of the State,” Mr Elliott concluded.
Today’s announcement by the SA Government is poor policy without logic.
The role of the Australian banks is to support customers and communities and drive economic growth and activity. It is not to be a blank cheque so governments can cover their own budget shortfalls.
South Australians want their state to be more attractive to investment that will enable it to transition its economy and create new opportunities and jobs – this tax will do the opposite.
My immediate thought when I heard about this was that the SA govt had gone a little crazy. If there’s one State that needs to ATTRACT employers, it would be SA. I can’t see how gouging the banks is going to do anything for the State’s business community. I run a national property buyer’s agency and we already had SA fairly low on the purchasing list. After this announcement I think we may as well just forget the place even exists. Such a shame as it has some lovely suburbs.