SA Premier Jay Weatherill has defended a decision to impose a big bank levy, expected to raise $370m.
THE South Australian Labor government has defended its decision to mirror its federal counterpart and impose a levy on the big banks.
The measure announced in the 2017/18 state budget is expected to raise $370 million over four years. “The commonwealth has reached precisely the same conclusion. This is a national economy with national banks which are not paying their fair share of tax,” Premier Jay Weatherill told ABC radio on Friday.
Mr Weatherill also implied SA had no choice because it had lost out on GST revenue, which is collected and distributed by the federal government. “Our preference would have been to pursue this through an expansion of the base of the GST, there’s no doubt about that,” he said.
Treasurer Tom Koutsantonis on Thursday said the major banks were undertaxed and that the proceeds will go toward the state’s infrastructure program.
The Australian Bankers’ Association says the SA levy is a “desperate political move”. “Tax policy in Australia is now becoming a joke at the whim of political opportunism,” chief executive Anna Bligh said.
Business Council of Australia CEO Jennifer Westacott says the tax exposed a government unable to get its own budget and spending under control. “The confused rationales for the tax are risible,” she said.
The SA levy will apply to the same institutions — Westpac, CBA, NAB and ANZ — to be hit by the federal government’s tax and will apply from July 1. The banks will be charged a quarterly levy of 1.5 basis points or 0.015 per cent on bonds and deposits of more than $250,000.
This compares to the federal levy of six basis points or 0.06 per cent to raise $6.2 billion over four years for budget repair. The SA government is also planning legislation to prevent the banks from passing on the cost to customers.
SA also plans to raise $48.8 million over four years with a four per cent surcharge on foreign investors who buy residential properties. But Mr Koutsantonis says both measures are necessary to create jobs and help the state weather the upcoming storm from the closure of car maker Holden’s assembly operations in October.
NSW WILL NOT FOLLOW SA
NSW won’t follow South Australia’s lead in double taxing the banks with a state levy, Treasurer Dominic Perrottet says.
“We don’t have to consider those things because, unlike other states, we run our finances well,” Mr Perrottet told reporters on Friday. “Over the past six years, the hallmark of this government has been strong financial management.”
Mr Perrottet did, however, reiterate the government’s view that NSW’s enviable financial position meant it was being short-changed when it came to the commonwealth’s distribution of the GST.
“We believe that states who innovate, who take on the tough reforms for the benefit of their citizens, should be rewarded, not penalised,” he said.
WA SAYS BANK LEVY ‘ATTRACTIVE’
But West Australian Treasurer Ben Wyatt says the South Australian government’s controversial bank levy is an attractive option and he’ll watch with interest ahead of delivering his own budget in September.
Mr Wyatt, whose recently elected government is dealing with a $3 billion deficit and record debt tipped to reach more than $42 billion, said he was not surprised states were looking at other revenue sources.
The WA government itself announced on Thursday hikes in utilities and other fees that will slug the average West Australian household an extra $438.40 a year under the 2017/18 state budget.
WA had the “greatest argument” given it had ceded revenue sources by signing up to the system of distributing the GST but that had not delivered, he said. Hitting the banks up for a levy was “politically a lot easier” than many other options.
“I am not saying it’s being considered yet, we are watching South Australia and seeing how they are actually going to do it,” he told ABC radio. “But I am not going to pretend for a moment it’s not an attractive option.”
BANKS COULD HIT BORROWERS
South Australian homeowners and businesses could face targeted rate rises as a result of the levy, according to analysts. “We expect the banks to push back against the South Australian bank levy as they will not want the other states to follow SA’s lead,” UBS analyst Jon Mott wrote in a note to investors.
The responses could include raising South Australian mortgage and corporate loan rates, rationing credit in the state, or threatening to move call centres and processing centres elsewhere, Mr Mott said.
Such responses could have a direct negative impact on the state’s economy, which has the highest unemployment rate in the country and low growth. Deutsche Bank analyst Andrew Triggs said the latest levy would have little impact on the banks’ profits but said it was unjustified and had wider implications.
“It further dents already fragile sentiment and raises the threat of increased political risk,” Mr Triggs wrote, adding that SA mortgage rate rises would be easy to implement.
Banks shares dropped at the start of trade with investors spooked by the announcement in Thursday’s SA state budget. “We believe it is possible the other states may follow SA’s lead and introduce further levies on the banks,” Mr Mott wrote.
“Additionally, with the federal election 12 to 18 months away, further increases in the federal bank levy cannot be ruled out, especially if the Australian budget remains under pressure.”
The Australian Bankers’ Association has already called on other state and territory leaders to rule out introducing their own bank levy. Mr Mott in May warned that the federal government’s 0.06 percentage point bank levy — popular with voters and parties, but anathema to the big banks — risked opening a Pandora’s box of levies, fees and taxes.
“Pandora’s Box is officially open,” he wrote on Friday.