The Australian Bankers Association (ABA) has released a new report arguing against the South Australian bank levy on the grounds that the Australian banks pay the largest amount of corporate tax in Australia:
“In terms of tax paid, it is banks first, daylight second. Banks make the highest contribution by far to help governments at all levels fund essential public services such as hospitals, schools and roads, and income support for those in need.”
The report, Taxes and other levies paid to governments in Australia by the banking industry, shows that in 2016 banks contributed over half of all income tax paid by the top 200 ASX companies…
“In 2016, banks paid $25 billion in wages and salaries to staff, $26 billion in dividends to shareholders – many of whom are mums and dads – and $66 billion in interest on bank deposits and bonds,” [ABA Executive Director – Industry Policy Tony Pearson] said.
This is a lame argument by the ABA. The banking sector is a regulated cartel whose exclusive license is granted by the government. Accordingly, its revenue and profits are insane compared to other industries, which is why it pays more tax.
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Of course, the ABA also conveniently ignores the various subsidies provided by taxpayers to the banks, including the implicit guarantee (which provides an estimated 20-40 basis point funding advantage worth an estimated $5 billion a year), deposit insurance, as well as the RBA’s Committed Liquidity Facility (another funding subsidy). These various supports have also helped make the banking sector insanely profitable.
The ABA will have to put forward a much better argument if it is to successfully argue against the bank levy.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
