Senior executives at Australia’s biggest bank have urged senators to consider major changes to a proposed $6.2 billion bank levy.
The Commonwealth Bank accepts the tax will pass Parliament but called for amendments, including a sunset clause on the legislation when the federal budget returns to surplus and for the tax to be imposed on foreign banks as well.
“The Australian government should not create tax policy which systematically and deliberately advantages banks based in the United States, Europe, Japan and China at the expense of its domestic industry,” CBA group general counsel Anna Lenahan told senators in Canberra on Friday.
“Given the rushed manner in which this levy has been announced and designed, we recommend a review in two years by an independent body such as the Productivity Commission,” Ms Lenahan said.
The levy is set to apply to five big banks with total liabilities over $100 billion from July 1, with the proceeds applied to budget repair.
Macquarie Bank does not believe it should be slugged by the levy, given it holds less than 2 per cent of the national mortgage market and less than 1.5 per cent of the credit card market.
Macquarie chief executive Nicholas Moore told senators the levy would make the bank less competitive.
“We’d like to express our surprise the levy is applying to Macquarie Bank given our size and the benefit we bring to domestic competition and the role we play in bringing export income into the Australian economy,” Mr Moore said.
“We are concerned that the impact of the major bank levy on the Macquarie Group is not fully understood and that unintended consequences may result.”
ABA questions levy
The Australian Bankers Association also took aim at the rationale behind the tax, as well as its design, raising questions about the revenue-raising target and fears it could be extended or increased in the future.
“Neither appropriate process have been followed or sufficient consultation been allowed,” ABA chief executive Anna Bligh told senators.
“The government has changed the rationale for the levy on multiple occasions,” she said.
Ms Bligh criticised the Turnbull government’s “truncated” approach to developing the tax and said her member banks had been promised but hadn’t received Treasury modelling underpinning the policy.
“This is an entirely new tax on activities that have never been taxed before on not just a single sector but five companies within that sector,” she said.
“Decisions have been made in a very short period of time without due consideration about how that might affect other parts of the banks involved.”
Taxing the big banks based in part on their success highlighted a worrying trend and the bill’s unintended consequences should not be taken lightly, Ms Bligh said.
“The proposed new tax is an additional cost of doing business and it must be borne by savers, borrowers, bank employees or shareholders.”
Representatives from Westpac, ANZ and NAB will also front the hearing on Friday seeking to amend the bill if not head it off altogether.
The banks want a mechanism to suspend the levy if a bank is under financial stress and the liability base should be narrowed to ensure banks have enough liquidity in place to see out tough times.
Labor supports the levy, which is expected to pass the Senate next week.