Australia's Biggest Banks Blindsided by Another New Tax Demand
Australian State Joins Federal Government in Taxing Big Banks
(Bloomberg) -- Australia’s biggest banks have blasted a plan by one of the country’s state governments to create an additional levy on lenders, and urged other provincial leaders to rule out similar moves.
South Australia surprised the nation’s largest lenders Thursday with a new tax that is in addition to a recently legislated federal levy. The Adelaide-based government aims to raise A$370 million ($280 million) over four years. It said that banks still aren’t paying enough even after the imposition of the A$6.2 billion federal charge.
“Major banks are undertaxed,” state Treasurer Tom Koutsantonis said. “They need to contribute their fair share to support our economy.”
The move was met with anger by the banking industry, which is still reeling from the federal government’s announcement in May. Lenders are also battling to win back the trust of the Australian public following a series of scandals that prompted calls for a wide-ranging public inquiry.
“Tax policy in Australia is now becoming a joke at the whim of political opportunism,” Australian Bankers’ Association Chief Executive Officer Anna Bligh said in an emailed statement. The South Australian tax is “an outrageous cash grab without policy substance” and “the impacted banks call on every Australian premier and first minister to rule out a similar tax,” said Bligh, herself a former Labor premier of Queensland state.
‘A Disgrace’
The 0.015 percent charge on local liabilities will apply to the same lenders as the national impost, which are Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, Macquarie Group Ltd.’s banking unit, National Australia Bank Ltd. and Westpac Banking Corp.
The proposed tax is “a disgrace” and “distortionary,” Westpac said in an emailed statement. ANZ CEO Shayne Elliott said in an emailed statement "this deeply concerning tax will likely impact business investment” in the state. The other affected lenders didn’t immediately respond to requests for comment.
The levy, to be imposed from July 1, is a further sign of how badly relationships between the banks and governments have deteriorated. South Australia’s government is currently controlled by the Labor party, which is in opposition at the federal level. The national tax passed through the national legislature in Canberra this week, following its unexpected inclusion in May’s federal budget.
“It just shows you there’s plenty of political risk” attached to the banks right now, said Omkar Joshi, an analyst at Regal Funds Management in Sydney. “It’s only just starting.”
The introduction of a state-based tax on financial services is a notable departure from previous policies. States gave up taxing banks as part of the changes that brought in a federal goods and services tax 17 years ago.
South Australia also outlined plans to increase costs for foreign buyers of residential property, echoing moves in neighboring New South Wales and Victoria. It will impose an additional 4 percent conveyancing surcharge from Jan. 1, which is slated to raise A$48.8 million over four years.
Both the tax proposals are designed to help South Australia repair its finances. The state has struggled with the demise of traditional manufacturing industries, including car-making. Its 6.9 percent unemployment rate is the highest among Australia’s eight states and territories.
--With assistance from Ruth Liew
To contact the reporters on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net, Jason Scott in Canberra at jscott14@bloomberg.net.
To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Benjamin Purvis, Jason Gale