Credit unions and retiree groups have called on the Federal Government to come clean about its plan to levy a tax on all consumer deposits, saying it should have been explained in this week’s budget.
The deposits tax, which was included in the former Labor Government’s budget planning in 2013, remains a live revenue item in the government’s accounts, but Treasurer Joe Hockey did not disclose any details in the budget.
Reports have suggested the tax would rake in at least $500 million a year from financial institutions who hold more than $1.6 trillion in deposits on behalf of personal and business customers.
Credit unions and pensioner groups want the tax scrapped and are disappointed that the government is refusing to disclose when it will be introduced.
National Seniors chief executive Michael O’Neill said he was hopeful that the government would drop the tax proposal.
“I’m certainly picking up a sense that the tax does not have universal support in the government,” Mr O’Neill told The New Daily.
“I recently discussed the issue with the Prime Minister and we have sent letters to all government MPs.
“We will be ramping up the pressure to get it scrapped and I am of the view that the government will be responsive.”
He said that some cross bench senators had also indicated they were likely to oppose the tax if it was brought to a vote in the upper house.
Credit unions warns government
Mark Degotardi, the chief executive of the Customer Owned Banking Association said the tax would be anti-competitive because it would hit credit unions and building societies harder than the four major banks.
“The deposit tax remains on the Budget books despite being rejected by the independent Financial System Inquiry (FSI) in its landmark report to the Government,” Mr Degotardi said.
“While the Budget papers say the deposit tax is subject to the Government’s response to the FSI, the fact the Government has not yet ruled it out is ominous news for savers.
“This new tax is scheduled to take effect in 2016 so the Budget was the right time for the Government to rule it out.”
The tax will increase the costs of credit unions that rely on deposits to fund more than 90 per cent of their lending activities.
While Mr Degotardi did not say how credit unions would cover the tax, it is most likely that the cost would be passed on to customers.
Several banks, including ANZ chief executive Mike Smith, have already indicated the tax would reduce the effective interest rates available to customers.
Another ‘grab for cash’
Mr O’Neill said the tax would undermine the government’s push to support retirees to fund their retirements.
“We’re opposed to the measure because it is a tax on savers and that is ridiculous because it runs counter to everything the government is trying to achieve on funding retirements,” he said.
“It is nothing more than a grab for cash.”
Mr O’Neill said that recent official rate cuts had reduced deposit returns to a level where retirees were barely able to preserve the value of their savings against inflation.
The deposits tax would further erode those returns and ignore advice given to the government.
“This tax is a nonsense and it is contrary to what the Murray inquiry recommended,” he said.