Gonski calls for bank tax level to be enshrined in law

ANZ Banking Group chairman David Gonski has called for the 6 basis point level of the budget bank tax to be enshrined in legislation, to ensure future increases require support from both houses of the federal Parliament. 

Mr Gonski broke his silence on the controversial budget measure in a letter to ANZ shareholders on Thursday. He is the last of the big four bank chairs to respond to the tax, which he considers inevitable.

“Clearly we are disappointed at the introduction of this new tax,” said Mr Gonski, who in a separate capacity is working with the government on its eponymous education reforms. “However, given the support it has in Parliament, we accept that it will pass into law.” 

It is understood Treasury is preparing to introduce the bank tax legislation next week. This will provide the first opportunity for it to be reviewed by those who have not signed strict confidentiality agreements that Treasury forced upon the sector.

 “The level of the tax should be set in the legislation so it cannot be increased in the future without the agreement of both Houses of Parliament,” Mr Gonski said.

Banking sources said one of the biggest concerns about the $1.5 billion-a-year impost was not its size (which will be a few hundred million dollars each year per bank), but the potential for the rate to be increased by future governments. 

When a similar levy was introduced in the United Kingdom, it was increased nine times. Analysts in Australia have pointed to the potential for politicians to ramp up the levy if any particular circumstances require it, essentially making the levy an unquantifiable and uncertain future liability. 

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The prospect of a future Labor government calling a royal commission, which then creates renewed public anger about the sector that is used as justification for the levy to increase, has been raised by several industry sources as a particular concern. 

Enshrining the rate would make it harder for government to raise it should the level of bank liabilities not be sufficient to meet the budget papers’ revenue projections for the measure. 

Mr Gonski also wants the law to require any increase in the tax to be referred to the Council of Financial Regulators “for their public advice on how the tax and any proposed changes interact with other regulatory objectives”. 

One of those objectives would likely be the requirement for banks to remain “unquestionably strong”. The Australian Prudential Regulation Authority, a member of the CFR, is expected to release a paper on this subject soon. 

ANZ wants to work constructively with the government to ensure the legislation is “as fair and efficient as possible in the circumstances”, Mr Gonski said in his letter. 

He also called for the bill to include a sunset clause, and to apply to foreign banks. But the banks are not expecting the legislation next week to include either of these two measures. 

The tax is “further evidence of the breakdown in the banking industry’s relationship with many in the Australian Parliament and broader community” and ANZ working to repair this he said. ANZ was called out by David Coleman, chair of the House of Representatives standing committee on economics investigating the banks, for its constructive approach to the CEO hearings in Canberra. 

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Westpac Banking Corp and National Australia Bank also support the level of the bank levy being enshrined in the bill at 6 basis points.