The government’s bank levy on Westpac, ANZ, Commonwealth Bank, NAB and Macquarie will come into effect from 1 July with few concessions to the major banks and no indication of when the tax might be removed.
While a Senate report released on Monday made five recommendations – including that the Senate Economics Legislation Committee examine the effectiveness of the policy, its influence on competition and whether the levy is required in perpetuity – these are unlikely to have any immediate impact.
“The government does not support a sunset clause for this legislation, and it is indeed our intention for the legislation to operate on an ongoing basis, which is something the government has made clear all the way through,” Senator Mathias Cormann, Minister for Finance and Deputy Leader of the Government in the Senate, said on Monday night.
“In relation to the Senate Economics Legislation Committee, the difficulty I have is that, as all senators know, the government does not have the numbers in the Senate at present. In two-year’s time it will be up to the Senate at that time to decide whether or not they proceed with this inquiry.
“From the government's point of view we support the Senate's reviewing of legislation and the Senate committee system through which legislation is reviewed. We would support an inquiry of the type that is proposed by the committee, but we are not be able to bind a future Senate, and it will be a question for the Senate ultimately as to if and how that proceeds.”
The question had been put to Senator Cormann by fellow Liberal Senator Ian Macdonald, who took the view that the new tax was a budget repair levy and “when the budget is repaired the levy should stop”.
“This has been sold to the Australian public as a budget repair measure and, once the budget is repaired, why do you continue on with a levy which many Liberals do not like? We do not like it because, again, I will briefly mention, profit is not a dirty word. The banks make profits, and we hope they do make profits,” he said.
“As Senator Bernardi said, 'The only thing worse than a very, very profitable bank is an unprofitable bank. We do not want them'. There are lots of mums and dads who are shareholders in banks and they want the banks to make profits.”
Macdonald added that it was appropriate that the Senate should be able to set up committees in two-year’s time to look at whatever it needs to but he had hoped that the government “might have actually made a firm commitment to that”.
“There were calls which, I have to say, I and some other committee members thought had some merit, in that there should be a sunset clause in the legislation,” he said. “Whilst the minister is right - the Senate can set up whatever committees it likes - I would have hoped that there might have been some government imprimatur that says, 'That's a good idea; we will do that in two years.'
“It does not cost the government anything. It does not in any way limit the passing of the bill. But it is something that I think would show good faith and would also address some of the very genuine concerns that were raised at the committee hearing.”
Crossbench senator Nick Xenophon tried and failed on Monday night to amend the legislation to ensure the levy would apply to foreign banks with global assets of over $100 billion. Specifically, this would mean that banks such as HSBC, ING and BNP Paribas would be liable for this levy in terms of their Australian liabilities.
“I think it would lead to an unfair and uneven playing field if foreign banks got a free kick on the bank tax. We heard the evidence that was given to the inquiry just a few days ago,” he said.
“They will get a strategic competitive advantage over the major banks, and I believe that is fundamentally unfair. We are looking at three foreign banks active in Australia whose global liabilities are well over the government's $100 billion threshold."
Cormann explained that foreign banks were not excluded from the application of the major bank levy; it just happens to be the case that no foreign bank in Australia is a major bank.
“What is relevant is the RD liabilities under the Australian licence, and no foreign bank operating in Australia is a major bank in Australia,” he said. “No foreign bank operating in Australia has liabilities of $100 billion or above. If in future any foreign bank operating in Australia grows to have a large presence with a subsidiary above $100 billion in total liabilities, they would be subject to the levy on the same basis.
“The concern of the government is that, if we were to support the amendment that Senator Xenophon has moved, the effect actually would be a lessening of competition in the banking market.
“If we were to assess foreign banks not based on their liabilities in Australia but on their liabilities worldwide, it would obviously put them at a significant disadvantage in terms of their activities in Australia, which would lessen competition, which would not be good for consumers. That is why the government has proposed to structure this major bank levy the way we have.”