Australian Bankers’ Association CEO, Anna Bligh, has expressed concern that a clause in the bank levy bill would empower the relevant Government minister to change the methodology used to calculate the tax. Bligh has also called for the bill to include a “sunset clause” for the levy. Bob Deutsch of the Tax Institute adds that the bill would enable the Government to adjust the levy via a legislative instrument to ensure that revenue meets its forecasts. From The AFR:
“The final clause in the bill gives the minister of the day unfettered power to change the methodology upon which the levy is to be calculated,” she said. “This clearly leaves the door open for further taxation in the future.”
Section eight of the Major Bank Levy Bill 2017 says: “The Minister may, by legislative instrument, provide for any matter relating to the method for working out an amount mentioned in subsection 4(2), paragraph 5(2)(b), or subsection 6(2).”
Those subsections refer to the total liability amounts.
Tax Institute senior tax counsel Bob Deutsch said the government appeared to have given itself some wriggle room to achieve the desired revenue outcome.
“If there is any uncertainty as to how the liabilities are calculated the minister can make a decision that is more favourable to the government by making a legislative instrument,” he said.
Ms Bligh said the government should set an end date for the levy, a so-called sunset clause, and remove any clauses “which allow for ongoing discretion”.
“Unpredictability around the base of the levy could undermine investor confidence and make it harder for Australia’s major banks to raise the money they need to lend to households and businesses,” she said.
There is great ambiguity about how much the 0.06% bank levy will end up raising. In the UK, they had to raise their bank levy at least three times (to 0.17%) to get the revenue they required, so why shouldn’t the bill give the flexibility to raise the levy in the future?
The purpose of the bank levy is to recoup part of the cost of the various taxpayer subsidies provided to the major banks. The estimated annual value of these taxpayer subsidies is around $5 billion, providing the banks with at least a 20bps funding advantage.
If anything, the levy should be tripled to better cover the cost of support provided on behalf of taxpayers to the banks.
