Big bank levy approved by Senate: Macquarie fails to dodge tax bullet
The big bank levy announced in this year’s Budget has been approved, despite widespread criticism and attempts by Macquarie, one of the five banks affected, to dodge it entirely.
The levy passed through the Senate with the support of the Labor and Greens parties, although Coalition senator Ian Macdonald voiced concerns about the Government taxing companies differently, saying, “I’m uncomfortable about that and I know that many in my party are.”
The new tax, expected to raise $6.2 billion over the next four years, will apply to Australia’s five largest banks - ANZ, NAB, The Commonwealth Bank, Westpac and Macquarie - and has been widely criticised as a lazy and ill-thought out policy.
Banks argued that it would damage their competitiveness on an international level and warned that the cost of the new tax would inevitably be passed onto customers - who were already stung with $4.41 billion in bank fees last year, according to the RBA.
The big four also pushed for amendments to the levy, including a sunset clause for when the budget returns to surplus, exemption for banks under considerable financial stress, and for the levy to be applied to foreign banks, such as HSBC, as well.
A Senate committee report agreed to a review of the levy in two years time and that the Treasurer should be able to suspend the tax for banks experiencing financial hardship. As for foreign banks, it said the levy would apply to any who met the “major bank” criteria - having assessed liabilities over $100 billion - but that so far none did.
Macquarie went one step further than the other four banks, arguing that it shouldn’t be included in the levy at all. The bank stressed its minor market share, representing just 2% of the mortgage lending market and the same portion of the retail deposit market.
Macquarie estimated the levy would account for approximately 11% of its Australian earnings, and that given the scale of its business, “may have unintended and disproportionate consequences on its local earnings.”
On the other hand, smaller banks have come out in support of the new levy, with ME CEO, Jamie McPhee saying that “...in our industry smaller banks are disadvantaged considerably by the major banks’ ‘too big to fail’ status.”
He said the new levy would “further level the playing field” in the banking sector and that, “Australia’s borrowers and depositors will be the ultimate beneficiaries from a truly competitive environment.”
As it stands, the levy will come into effect on July 1, and be applied to Australia's five biggest banks - including Macquarie.