Banks and business groups have described South Australia’s plans for a new bank levy as an “outrageous cash grab”, and called on other state premiers to rule out similar measures.
The premier, Jay Weatherill, used the state budget on Thursday to announce the levy, which is planned to raise $370m over four years, including $90m in its first year.
The federal government announced its own $6.2bn levy in last month’s budget. Weatherill used the federal government’s budget papers, which suggested the sector was undertaxed, to justify South Australia’s decision.
“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,” Weatherill told Radio National on Friday.
The Australian Bankers’ Association was quick in its condemnation. Its chief executive, the former Queensland premier Anna Bligh, said states had no role in banking policy, and the South Australian government was simply attempting to raise revenue in “a desperate political move”.
“Let me be clear – it is not the job of banks to prop up government budget shortfalls,” Bligh said. “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,” she said.
Bligh called on the other premiers and first ministers to rule out introducing similar levies.
Unemployment in South Australia is 6.9%, the highest in the nation. Jobs growth has also been slow this financial year, at about 0.4%, and the state government fears the departure of Holden will cause the loss of thousands of jobs and imperil the economy.
Weatherill said he would take measures to prevent banks passing on the costs to taxpayers. That relies on the state government being able to show that increases in banking fees are directly linked to the levy.
He said he had previously pushed for the GST to be applied to the financial sector.
“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.
The Business Council of Australia warned the new tax would reduce investment nationally and in South Australia. The chief executive, Jennifer Westacott, said the levy was a “knee-jerk approach to whacking job-creating businesses”.
“It beggars belief that instead of supporting policies that will increase the investment needed to create jobs, such as a globally competitive company tax rate, the South Australian government is doing the opposite,” Westacott said.
“It is galling that a state government that is not prepared to make tough decisions to strengthen its own economy should impose a tax that will harm the investment environment across the entire country,” she said.
The big banks also immediately attacked the decision.
ANZ’s chief executive, Shayne Elliott, described it as a “deeply concerning tax” that would harm investment and the state economy.
“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,” Elliott said.
“South Australia does not need another drag on its economy after the repeated power failures over the last few years.”