By
The Green Party has caused a stir following the release of its proposal for a 20 basis points levy on bank assets in excess of $100 billion. Now, in a scathing defence of major banks, the ABA has dubbed it the ‘retirement savings tax’.
On Friday, Greens Deputy Leader and banking spokesperson, Adam Bandt, outlined his proposal for a ‘Public Support Levy’ on the big four banks in return for what it calls the implicit ‘too-big-to-fail’ policy of the government that underwrites their activities.
But ABA CEO, Steven Münchenberg, has rejected the call, claiming it would effectively amount to a tax on Australians’ retirement savings.
“The majority of bank profits are paid through dividends to Mum and Dad shareholders and superannuation funds. Taxing banks’ profits reduces those returns for working Australians saving for their retirement through superannuation accounts and to retirees who are increasingly dependent upon positive business profit growth.”
He also denies claims that major banks’ profits are ‘excessive’, saying the facts don’t support this contention.
#pb# “Banks’ profits are not excessive, especially when you compare them to other companies. Bank revenue appears large for the simple reason that the banking sector is large. The task of transforming savings into investment now constitutes the largest business sector in Australia, even larger than mining and manufacturing. When viewed against the size of its asset base, bank revenue is reasonably low.
Mortgage Ezy CEO, Garry Driscoll, says this sounds like ‘spin’ to him, but says he generally sympathises with the ABA’s stance.
“I would agree that if the banks were not making a reasonable profit this would impact on their share price, which would have a knock-on effect for the average Australian’s superannuation funds. I am fundamentally opposed to increasing taxes, as that simply discourages people and companies from generating wealth.”
Driscoll says he has no issue with charging banks for the guarantee, as long as it’s made available to other banks and lenders.
“However, based on Wayne Swans track record, if he thinks it’s a bad idea then it may have some merit!”
Münchenberg says another impact of the Greens’ policy would entail banks needing to pass on higher costs to consumers, because of the ‘need to maintain profitability – and Driscoll agrees.
“The only way to enhance competition is to provide alternative funding for the non-banks and the smaller banks. This is not a hand-out that would cost the taxpayer, but something along the lines of the Canadian model, where the government actually makes a long-term stainable profit.”
Bandt, however, says the argument that increased costs will be passed on to consumers doesn’t hold ground.
#pb# “By limiting the levy to those big four banks that are truly ‘too big to fail’, the levy won’t be passed on to consumers as the big banks will face competition from smaller banks who aren’t paying the levy.”
Brandt says It’s time, however, for the big four banks to pay a ‘fair contribution’ for the public support they receive.
“The big banks get a discount on their wholesale funding because of the ‘too-big-to-fail’ policy of the government. If they went to the wall the taxpayer would bail them out, which means the big four get cheaper funds than their competitors, so the taxpayer should get a fair return for this de facto contribution to big bank profits.”
“The big four banks,” he says “are taking all of the profits while the taxpayers are wearing all of the risk.”
