Labor has confirmed it will pass the bank tax legislation through the Senate despite growing concerns it will not raise the $6.2 billion as forecast in the budget and could fall short by between $100 million and $500 million a year.
As the government struggled to explain the discrepancy on Tuesday, Morgan Stanley and Deutsche Bank concluded that, based on initial estimates from the banks that will pay the tax, the government could have to increase the 0.06 per cent rate to reap the intended revenue.
The Greens, who also support the bank levy, are so concerned by a revenue shortfall that they will propose an amendment to place a floor under the levy to guarantee the revenue.
Ultimately, however, the legislation will pass the Senate next month and the tax will begin as scheduled on July 1.
“I refer to the bank tax which Labor will not stand in the way of,” Opposition leader Bill Shorten said when prefacing his first question to the government about the revenue concerns.
Based on their preliminary assessments of the draft legislation, the big four Australian banks have estimated that combined, they will pay in the first year $965 million after tax and $1.38 billion before tax.
The fifth bank, Macquarie, is yet to furnish an estimate but it is believed to be below $100 million, meaning the total after-tax contribution by the five banks will be around $1 billion. This is well short of the $1.6 billion stated in the budget for 2017-18.
Under fire in Parliament, Treasurer Scott Morrison conceded the $1.6 billion estimate was an accrual figure and the expected cash receipt from the tax for 2017-18 was actually $1.2 billion. Based on the bank estimates, not even this figure will be reached.
Labor said the government was now making it up as it went along.
“Yesterday the Prime Minister and government focused on the $1.6 billion in 2017-18, the number it has headlined since budget night,” said shadow treasurer Chris Bowen.
“Today the Treasurer has moved the goal posts by deciding to focus on the cash receipts figure of $1.2 billion in 2017-18.
“It doesn’t matter which field Scott Morrison wants to play on, there’s a shortfall in revenue.”
Deutsche Bank said in a statement the estimates released so far by the banks, although preliminary, “suggest that the aggregate amount to be collected by the government is likely to fall short of the $6.2 billion targeted in the budget over the 4-year period, hence we see a risk that the 6 basis points levy could be lifted”.
Morgan Stanley said “a 6 basis points levy is unlikely to be enough” and “could be adjusted accordingly”.
“The banks’ disclosures seem to confirm our view that a levy of 6bp would not raise enough to meet the government revenue-raising objective of at least $1.5 billion per annum. In fact, we believe the levy may only raise $1 billion in its first full year.”
But Mr Morrison continued to stand by the estimates.
“The assumptions behind the numbers hold,” he said. His office explained that the levy would raise $5.5 billion over the first four years with the extra $700 million, that would take the total to the $6.2 billion forecast in the budget, coming from the first quarter of the fifth year.