SA To Tax Banks Too

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 said:

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.

NAB said:

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.



The Problem With The Bank Tax

Interesting report from The Centre for Independent Studies – “The Major Bank Levy: We’re all going to be hit“.

The major bank levy was proposed in the 2017–18 Budget. The levy has numerous flaws including:

  • The costs of the levy will likely be passed on as higher interest rates for mortgages and business loans, harming households and business investment which is very weak.
  • The levy won’t materially change the expected surplus, based on current forecasts and therefore will minimally impact Australia’s AAA credit rating.
  • If the big banks have ‘unfair’ advantages, it is far better to remove those advantages than impose a levy.
  • If the levy is supposedly pro-competitive, this prejudges and devalues a separate Productivity Commission (PC) inquiry into this issue, which has been compromised before it even starts.
  • The development of the levy breaches numerous requirements for best practice regulation and increases sovereign or regulatory risk.
  • The levy cannot be ignored as being small relative to the economy. A bad policy is bad no matter what its size, and the levy is likely to be increased to a more harmful level.
  • Banks will be encouraged by the levy to use funding that is more risky for the financial system or taxpayers.
  • If the levy confirms large banks are Too Big To Fail, this contradicts official work to ensure this does not occur, and will increase financial market risk.

Bank Tax Now Law

The Senate Inquiry on the Bank Tax reported yesterday.  Subject to consideration of the other recommendations, the committee
recommends that the bills be passed. It was, last night.

Recommendation 1 – The committee recommends a review be conducted by the Senate Economics Legislation Committee in a minimum of two years to examine:

  • the efficacy of the policy in fulfilling its stated objectives;
  • the effect on competition in the Australian banking market; and
  • whether the levy is required in perpetuity, including the need for a further review at the time the stated objective of the levy is achieved; that is when the budget has been ‘repaired’.

Recommendation 2 – The committee recommends that Treasury closely examine issues relating to the technical aspects of the bills to determine if changes are required to avoid double taxation and/or to narrow the liability base.

Recommendation 3 – The committee recommends that Treasury provide greater explanation as to the rationale for the method of liability calculation which presently excludes foreign banks, and specifically provide an explanation as to why Macquarie Bank is subject to the levy while foreign based competitors are not.

Recommendation 4 – The committee recommends that the legislation be amended so that the Treasurer may, on the advice of APRA, suspend the application of the levy to any or all Authorised Deposit-taking Institutions in extreme financial or economic circumstances.

Recommendation 5 – Subject to consideration of the other recommendations, the committee recommends that the bills be passed.

Within the 30 page report, we found the comparative table on bank levys most interesting.


How the bank levy could end up hitting brokers

From Mortgage Professional Australia.

As Australia’s government indulges in another round of bank bashing, brokers could get caught in the crossfire, writes MPA editor Sam Richardson

At 10AM the ASX opened and the bank stocks began to plummet. ANZ, CBA, NAB and Westpac were hit, as well as Macquarie: nearly $14bn was wiped from their share prices in total. This would all have made sense on 10 May, the day after the government unveiled a new 6 basis point bank levy, but the price collapse occurred on 9 May, nine and a half hours before the budget was unveiled.

Evidently someone knew the bank levy was coming, if not the banks themselves.

“This new tax is not a well-thought-out policy response to a public interest issue,” commented Australian = Bankers’ Association CEO Anna Bligh. “It is a political tax grab to cover a budget black hole.”

Although it is equivalent to just 0.06% of a bank’s liabilities, and affects only the big banks and Macquarie, the levy is expected to bring in $6.2bn over four years. The government says the levy will apply from 1 July, although it is less clear when it will end, or how the banks will pay for it.

Raising rates isn’t an option, according to Treasurer Scott Morrison. “Don’t do it,” he told banks the day after the budget. “Don’t confirm their worst impressions. Tell them another story. Tell them you will pony up and help fix the budget.”

Rate rises and competition
Australia’s banks don’t appear to agree. Commonwealth Bank CEO Ian Narev has already warned that “higher costs are either passed on to customers through reduced service levels or higher pricing, or to shareholders through lower returns. There is no middle option to absorb costs.” While not explicitly stating they’ll raise rates, the other banks have made similar points to Narev’s.

Major bank borrowers’ interest rates could rise by 20 basis points, analysts from investment bank Morgan Stanley have predicted.

Martin North, principal of research firm Digital Finance Analytics, made a similar claim when speaking to MPA. “Because the mortgage book is half of the total book you assume there would be a 15–20 basis points hike in mortgage rates, if they put it all through.”

Although the levy will only affect the big five, refinancing your customers with the nonmajors may not be the best option, North warns. “If the big four reprice their mortgages I’m pretty sure the regionals will follow anyway, because they need to do margin repair on their books.”

Adelaide and Bendigo Bank CEO Mike Hurst and others in the non-major sector have welcomed the levy as a way to even the competitive playing field. Deloitte told MPA that concerns about competitors could dissuade the banks from making aggressive rate hikes. However, North says the non-majors still face a “significant competitive disadvantage” because of higher capital requirements.

Foreign-owned banks could be the main beneficiaries of the budget, according to the major banks. ING DIRECT and HSBC have the ability to raise funds from overseas while being exempt from the levy due to their small presence in Australia. Foreign-owned banks start from a low base, however: ING’s share of AFG’s lending was just 3.51% in February, while HSBC only resumed dealing with brokers in June.

“If the big four reprice their mortgages I’m pretty sure the regionals will follow” – Martin North, Digital Finance Analytics

Unscrambling the egg
Standing between major bank borrowers and higher rates is the ACCC. Morrison has tasked the ACCC with forcing the banks to explain future rate changes and ensure they don’t use rate hikes to pass on the levy.

Unfortunately for the Treasurer, explaining rate hikes is “like trying to unscramble an egg”, says DFA boss  North. “I think it would be impossible to identify which elements of funding, or the levy, would be responsible for moving prices up or down. There’s a whole host of reasons why, outside the levy, prices will continue to rise,” he explains. International funding is still expensive; the banks are still hindered by overly cheap loans from last year; APRA is forcing them to reduce interest-only lending, and, finally, capital requirements continue to increase. At the end of the year APRA will publish a paper which North expects to recommend raising rates and consequently rates on mortgages.

Therefore, says North, “we have not seen the end of the mortgage rate hikes”.

“There is no middle option to absorb costs” Ian Narev, Commonwealth Bank

Impact on brokers
The government’s bank bashing could end up hitting brokers.

“This levy comes at a time when bank earnings and profitability are already facing multiple headwinds,” warned credit ratings agency Moody’s, pointing to moderate credit growth, low interest rates and rising capital requirements. Coupled with further scrutiny of vertical integration by the Productivity Commission later this year, the banks have the incentive to take radical action.

Banks could save billions of dollars by cutting broker commissions, according to UBS. The investment bank claims that the cost of brokers is rising and accounted for 23% of the cost base of the major banks’ personal/consumer divisions in 2015.

Analysts Jonathan Mott and Rachel Bentvelzen wrote: “We estimate mortgage broker commissions add 16bp per annum to the cost of every mortgage in Australia, irrespective of whether the mortgage was broker or proprietary originated.”

Following the ASIC and Sedgwick reviews the banks will start to lower commission rates over the next few months, the analysts have predicted. “While mortgage brokers are unlikely to be happy with this outcome, we believe there is little they can do,” they said. Competition between banks would keep interest rates low, however, and “offset the additional repricing expected by the banks as they adopt the new Bank Levy”.

Sedgwick’s review gave the banks until 2020 to enact its recommendations, without explicitly recommending cuts to commissions. The consultation period for responses to ASIC’s review closed in June, making it unclear how banks would radically change commissions in time for the implementation of the levy on 1 July.

Whatever the outcome, the budget has created a $6.2bn reason for Australia’s banks to start making changes.

COBA – Opening Statement Bank Levy Inquiry

COBA’s opening statement focussed on the impact of the implicit guarantee which the large banks enjoy, which they says is distorting the banking market by providing the biggest players with an unfair funding cost advantage. They welcome the major bank levy as a modest step towards reducing this funding cost advantage.

COBA is the industry association for Australia’s customer owned banking institutions – mutual banks, credit unions and building societies.

We have 4 million customers, around 80 institutions across Australia, $106 billion in assets and roughly 10 per cent of the household deposits market.

This Bill is primarily about Budget repair but it is of course intended to contribute to a more level playing field in the banking market.

It comes as no surprise we strongly support measures to promote competition in banking because they are very clearly needed.

There is a big problem with competition in banking in this country.

In his second reading speech, the Treasurer noted that:

  • the banking sector is an oligopoly and that the largest banks have significant pricing power which they have used to the detriment of everyday Australians
  • the banking system is highly concentrated
  • major banks benefit from a regulatory system, including mortgage risk weight settings, that has helped embed their dominant position.

From our perspective, the most important component of the Bill is that it is intended to complement prudential reforms being implemented by the Government and APRA to improve financial system resilience and competition.

We support measures to reduce unfair competitive advantages enjoyed by the major banks.

One of these is the unfair funding cost advantage enjoyed by these banks as a result of the implicit guarantee provided by taxpayers due to the perception that the major banks are ‘too big to fail’.

COBA welcomes the major bank levy as a modest step towards reducing this funding cost advantage.

In relation to the broader prudential reforms being implemented by APRA and the Government, we note that the ‘too big to fail’ problem is the target of Recommendation 3 of the 2014 Financial System Inquiry report.

That recommendation calls for implementation of a framework in line with emerging international practice, to facilitate the orderly resolution of Australian ADIs and minimise taxpayer support.

The Government’s 2015 response has no specific implementation date, but says steps should be taken to reduce any implicit government guarantee and the perception that some banks are too big to fail.

The Government has endorsed APRA as Australia’s prudential regulator to implement this recommendation in line with that international practice.

We acknowledge that the ‘too big to fail’ problem is a very complex problem to solve but we would encourage the Government and APRA to continue to give this issue the highest possible priority.

This is because the ‘too big to fail’ problem tends to get worse over time. The unfair funding cost advantage creates incentives for major banks to become even bigger and more complex.

The 2014 Financial System Inquiry report said perceptions of implicit guarantees have costs, creating distortions in the market.

The report said credit rating agencies explicitly factor in ratings upgrades for banks they perceive to benefit from Government support, directly benefiting those banks. As has been said by previous witnesses, this was worth a two-notch upgrade for the major banks in 2014.

As of last month, at least in relation to one of the rating agencies, Standard & Poor’s, that two-notch upgrade is now three notches.

The implicit guarantee is distorting the banking market by providing the biggest players with an unfair funding cost advantage.

The regulatory framework helps the major banks in other ways.

Compared to major banks, customer owned banks and regional banks have to hold much more regulatory capital against mortgages. This gives the major banks another significant funding cost advantage.

APRA has formally designated the major banks as ‘systemically important’ and applied a capital surcharge on them of 1 per cent.

But this surcharge is right at the bottom end of the international spectrum of such capital surcharges, which range up to 6 per cent in some cases.

We have a banking market where major banks benefit from unfair regulatory capital settings and a subsidy from taxpayers.

The major bank levy is a modest but welcome step toward a more level playing field in banking.

So from our point of view, we look forward to APRA and the Government working on the broader prudential reform agenda to promote competition and resilience in the banking market.

Consumers stand to gain from a more competitive banking market where all competitors have a fair go.

NAB’s opening address – Senate Economics Legislation Committee on Major Bank Levy Bill

NAB’s address mirrored the ANZ approach. Whilst accepting the tax will be implemented, they call for a sunset clause, extension to foreign banks operating in Australia; and a review of implementation after 18 months. They also make the point the tax cannot be absorbed.

We are pleased to appear before you to discuss the major bank tax.

While limited, this Senate Inquiry is an important process and one that NAB and our Chairman Ken Henry has advocated for – to ensure transparency and a greater understanding of the consequences of this tax.

With me is our Treasurer Shaun Dooley. I will make a short statement and then we are both happy to take your questions.

Banking plays a vital role in the strength and stability of the Australian economy.

This has been well understood by governments in the past.

Historically, we’ve had constructive engagement on significant policy reform which has allowed everybody to fully understand the impact on bank customers, our business and the economy.

As Treasury Secretary John Fraser told this Committee just last month: “any rapid policy change or uncertainty can affect the confidence of businesses and consumers and this in turn can undermine growth”.

The major bank tax is rapid policy change and has created real uncertainty.

There are four key points that are central to our concerns:

Firstly, the lack of consultation and rushed process has contributed to the development of poor tax policy that will affect every Australian.

While the UK bank tax was introduced under vastly different circumstances, consultation with the industry there extended for three months.

In contrast, the major Australian banks had about 40 hours to provide submissions based on the draft legislation.

As a result, many questions remain. The impact on the economy is still not fully known and there will be unintended consequences that will need to be addressed.

Secondly, it has repeatedly been stated that the tax can be simply “absorbed” by the banks. No cost, such as a tax, can be absorbed by any business – it must be passed on somewhere.

Based on what we know to date and applied to NAB’s business as it stands, we estimate the cost of the bank tax on NAB would be around $350 million annually pre tax, or $245 million post tax.

No decisions have been made on how NAB will manage this additional cost. But the cost will be borne by one or a combination of these groups: our customers – borrowers and savers – our shareholders, our suppliers or our employees.

Thirdly, the inefficient design of this tax places the impacted major Australian banks at a competitive disadvantage in wholesale markets that are critical to a well-functioning economy.

In these markets the Australian banks compete against large and profitable global institutions that are not impacted by the tax – because their domestic liabilities do not exceed the tax’s $100 billion threshold.

And lastly, we need to be clear about the purpose and impact of the tax to ensure confidence in the Australian banking sector.

Offshore investors have voiced their concerns about the tax and what it says about relations between the Australian banks and the Government.

This is due to the surprise nature of the intervention and the “shock” it created – coupled with the lack of a clear explanation and apparent conflict with previous regulatory guidance.

Confidence in the Australian banking sector is vital to ensure Australia has access to off-shore funding and capital.

These global investors have choice as to where to invest their money and the lack of clear policy rationale has been of concern, and goes directly to confidence in our market.

Senators, we accept that this tax will be implemented. However we strongly urge you to consider the following three points:

A sunset clause so that when the Budget returns to surplus the tax is removed;

To widen the tax to include international banks operating in Australia; and

Commit to a review of the tax within 18 months of implementation to fully assess its impact and any potential unintended consequences.

ANZ’s opening address – Senate Economics Legislation Committee on Major Bank Levy Bill

ANZ’s address makes three points. The levy should be temporary, should be applied to foreign banks, and the costs will be passed on in one way or another.

Good morning and thank you for the opportunity to appear today.

With me today are Rick Moscati, our Group Treasurer, and Jim Nemeth, our Head of Tax. While ANZ is disappointed by the bank levy, we accept that it will become law.

Our aim today is to work constructively to ensure that the legislation is as fair and efficient as possible.

We appreciate the changes made already to the treatment of derivatives and that the rate of the levy is reflected in the Act.

I have three points to make briefly today in relation to our submission.

Firstly, as one of the principal reasons for the levy is budget repair, we think that the levy should cease when the budget returns to surplus.

Secondly, we believe the levy should apply to major foreign banks operating in Australia and exclude the offshore branches of Australian banks. This would be consistent with principles of international taxation, avoid double taxing Australian banks and mean that all major banks in Australia, foreign or domestic, are treated equally. Without the levy applying to major foreign banks, Australian banks will be at a significant disadvantage in the institutional markets where foreign banks mainly compete.

Further, we borrow money in offshore branches to lend to offshore institutional customers. If the levy applies to our foreign branches, it makes us less competitive overseas. This will constrain Australian banks’ ability to develop offshore business and serve customers in the region.
Recent amendments to the UK levy are consistent with this. That levy applies to large foreign banks operating in the UK and is being amended to exclude UK banks’ offshore liabilities.

The reasons for this approach include ensuring UK banks are not hurt by operating offshore and to tax foreign and domestic banks equally. The same rationale applies to Australia.

My last point is that we are concerned about the combined impacts of increased bank regulation and the levy.

We believe there should be appropriate reviews of how these policies interact.

Speaking to international investors recently, they share these concerns, not just in relation to the banking sector, but also in relation to broader investment in Australia.

The points I’ve made concerning a levy sunset and reviewing its cumulative impact with other policies would help alleviate these concerns.

Before I close and to anticipate your questions, we have not decided how we will respond to the levy. In any event, there are legal limitations to what I can say today.

However, we cannot ‘absorb’ the levy. Based on ANZ’s 31 March Balance Sheet, we estimate that the annualized financial impact of the levy would have been $345 million before tax.

It is an additional cost that the shareholders, customers and employees of ANZ will bear.

Our options are to reduce what our owners receive, reduce our costs or charge higher prices.

As announced last year, ANZ has already reduced what our owners receive by cutting our dividend. We are also already focusing heavily on reducing absolute cost levels. We have reduced costs over the last year and announced that we are working on further reductions.

ANZ will continue to work constructively with you and your Parliamentary colleagues to ensure that the levy is as fair and efficient as possible.

A better alternative to levying the bank tax

From The Conversation.

In all the noise and fury surrounding the bank tax, a more effective alternative proposal to implementing it has apparently been forgotten. In 2015 South Australian Premier Jay Weatherill proposed that banking should be subject to the GST.

This idea had much sounder economic underpinnings than the current levy, would have raised much more revenue (maybe three to four times), and would have applied to all banks rather than just the big banks. Of course, that last feature would have united the banks in opposition, in contrast to the current divide and (hopefully) conquer approach of Treasurer Morrison.

Unlike other industries, the traditional business of bank deposit taking and lending is exempt from GST. This creates economic distortions and omits a large part of the economy from being taxed.

The omission of banking from the GST is a product of history, because applying it to the banks was seen as too complicated. The reason lies in the nature of the GST as a “value added” tax.

Essentially the 10% tax is added to the sales price of an output good or service, but the seller obtains a GST credit for the tax component of the price of input goods they have bought. The historical view was that it is difficult to identify what are banking sector inputs and outputs, and thus value added.

Is providing a deposit account an input (in making loans) or an output in its own right? And there is generally no explicit fee charged for the service of intermediation between depositors and borrowers, with bank costs and profits covered by the interest rate spread.

The argument that its too complicated is no longer a sufficient justification. At one level the aggregate “value added” by a bank is easy to estimate. It’s the sum of profits and wages. The size of the profits and wage bills of the banks by itself indicates the potential tax revenue foregone and potential economic distortions caused by favourable tax treatment of banking services.

At the product level, while banks receive input tax credits on purchased inputs they do not add a GST cost to the price of deposit or loan products and services. Introducing GST would mean that banks would need to add the tax on their value added to prices charged (directly or implicitly via changes to interest rates) but would be able to utilise the GST credits they currently get on purchased inputs.

The historical complication was determining how much of aggregate value added and various input costs to allocate to each product. How should the cost of bank premises or teller time be allocated between individual deposit and loan customers?
That is a difficult problem. But banking systems of activity based costing, product and divisional profitability have evolved to enable an application of the GST. It might be an imperfect application, but that is arguably a lot better than none at all.

Exempting traditional banking services from GST is a significant cost to tax revenue. But it also creates economic distortions.

One, at an aggregate level, is that banking services get a tax advantage over other forms of economic activity – perhaps helping to partially explain why the financial sector has grown as a share of total GDP.

Another distortion lies in effects on different types of customers. Yes, application of GST to banks would raise the cost of banking services to all customers – since it is unrealistic to expect that this tax, even though effectively levied on bank profits plus wages and salaries, would not be passed on.

But it would mean that business customers would get GST input tax credits on their purchases of banking services to offset against the GST bill on their sales. Households, as consumers would not get that benefit, reducing tax induced distortions to their use of banking services relative to alternative expenditures.

The detail of the GST (including federal – state revenue sharing implications) is a mystery to most people, so it’s easy for counter-arguments to be produced to obfuscate and obstruct the proposal to apply it to banking. But it has merit and warrants serious consideration.

It’s highly unlikely that Treasurer Morrison will want to deal with the fall-out from adding a bank GST impost on top of the “big bank tax”. But perhaps, placing a sunset clause on that and using the lead time to develop a coherent plan for applying GST to banks is worth considering.

Author: Kevin Davis, Research Director of Australian Centre for FInancial Studies and Professor of Finance at Melbourne and Monash Universities, Australian Centre for Financial Studies

Significant Questions Remain on Bank Tax – ABA

The legislation for the major bank levy introduced today shows the Federal Government’s original design had major flaws and significant questions remain on how this rushed legislation will affect the economy, the Australian Bankers’ Association said today.

“The Government has been forced to make concessions to the bank levy following the banks’ one and only opportunity to meet with Treasury on such a major Budget measure,” ABA Chief Executive Anna Bligh said.

“Banks welcome the concessions which would have had unintended consequences across the financial system, but despite these changes, major banks remain concerned about the Government’s poorly-designed tax grab,” she said.

The legislation, revealed to the public for the first time today, showed the levy will no longer apply to:

  • Derivative transactions, which banks use to minimise their risk.
  • Money the banks hold with the RBA.

Banks had argued for both of these changes.

“This is a tax on all Australians even with these changes. The Government’s own analysis released today acknowledges that the impact of this tax could hit “bank borrowers, lenders, shareholders or some combination of these groups”1,” Ms Bligh said.

“This levy will impact on investor confidence in Australia’s major banks and make it more expensive for banks to raise the money they need to lend to businesses and individuals,” she said.

“The major banks’ market value has already fallen by around $39 billion since the Budget.”

Despite these changes the Government still maintains that the levy will raise $6.2 billion over the four years of forward estimates in the Budget.

“Treasury has not provided sufficient modelling to explain their calculations in the Budget. At this stage, we are still uncertain just how much the levy will raise.

“There is no sunset clause which is unfair to those who will be impacted by the tax. One of the rationales for the levy is that it will contribute to budget repair,” Ms Bligh said.

“If that is the case then let’s be fair and remove the tax once the budget is back in the black.”

Treasury delays first bank levy payment

From Australian Broker.

Treasurer Scott Morrison has delayed the first payment of the controversial bank levy and argued that any added costs will be no excuse for the big lenders to alter mortgage or deposit rates.

In his second reading speech on the Major Bank Levy Bill in Parliament House, Morrison said the first levy calculation and instalment will be postponed by three months with the first payment now occurring on 21 March 2018.

“The government is working with the banks to ensure a smooth transition to the new regime. To assist major banks to begin to comply with the levy, the first levy calculation and installment will be delayed by three months – at no cost to revenue – to provide additional time for banks to make necessary systems changes,” he said.

This means that the banks will have to pay for both the September and December quarters for 2017 on the same day. The levy for the 2018 March quarter will be payable on 21 June while that for the June quarter will be payable on 21 September.

The levy does not give the banks an excuse to increase costs for customers, Morrison added.

“That is why the government has directed the ACCC to undertake an inquiry into residential mortgage pricing. The ACCC will be able to use its information-gathering powers to obtain and scrutinise documents from any bank affected by the levy and to report publicly on its findings.”

The Treasurer said he expected the banks to balance the needs of borrowers, savers, shareholders and the wider community following the introduction of the levy.

“The ACCC inquiry will illuminate how the banks respond to the introduction of the levy and give all Australians the information they need to get a better deal elsewhere from any of the more than 100 other banks, credit unions and building societies, as well as other non-bank competitors.”

However, CEO of the Australian Bankers’ Association (ABA) Anna Bligh has said that these costs will already be passed onto the public regardless.

“The government’s own figures and the government’s own documents can see that the impact of this tax is likely to fall on savers, borrowers, lenders and shareholders. It is a concession at last and an acknowledgement from the government that this is a tax on all Australians,” she told the media.

“We don’t have to wait for this tax to be introduced for it to have an impact on Australians right now. Since budget day, $39bn has been wiped off the market value of our five largest banks. And every Australian who has a superannuation account will see a loss of value.”

Commenting on the changes made by the Treasurer today, Bligh said the government “has been forced to make some concessions” with the banks as both parties attempt to understand the underlying complexity of the levy.

“Banks have been telling the government for three weeks that this is complex and they need to get it right,” she said.

In his speech to Parliament, Morrison also effectively said the levy would not be raised, keeping the level at the previously proposed 0.06% per annum for any eligible licensed entity liabilities at the big five banks.