The legislation for the major bank levy, introduced on Tuesday, shows the Federal Government’s original design had major flaws and significant questions remain on how this rushed legislation will affect the economy, the Australian Bankers’ Association has said.
“The Government has been forced to make concessions to the bank levy following the banks’ one and only opportunity to meet with Treasury on such a major Budget measure,” ABA chief executive Anna Bligh said.
“Banks welcome the concessions which would have had unintended consequences across the financial system, but despite these changes, major banks remain concerned about the Government’s poorly-designed tax grab."
The legislation, revealed to the public for the first time yesterday, showed the levy will no longer apply to:
- Derivative transactions, which banks use to minimise their risk.
- Money the banks hold with the RBA.
Banks had argued for both of these changes.
“This is a tax on all Australians even with these changes. The Government’s own analysis acknowledges that the impact of this tax could hit 'bank borrowers, lenders, shareholders or some combination of these groups',” Bligh said.
“This levy will impact on investor confidence in Australia’s major banks and make it more expensive for banks to raise the money they need to lend to businesses and individuals. The major banks’ market value has already fallen by around $39 billion since the Budget.”
Despite these changes the Government still maintains that the levy will raise $6.2 billion over the four years of forward estimates in the Budget.
“Treasury has not provided sufficient modelling to explain their calculations in the Budget. At this stage, we are still uncertain just how much the levy will raise," said Bligh.
“There is no sunset clause which is unfair to those who will be impacted by the tax. One of the rationales for the levy is that it will contribute to budget repair.
“If that is the case then let’s be fair and remove the tax once the budget is back in the black.”