Westpac chairman, Lindsay Maxsted, is the latest banking fat cat to decry the Turnbull Government’s 0.06% levy on the liabilities of the Big Four banks and Macquarie. From The Australian:
Chairman Lindsay Maxsted says the levy is a “highly inefficient and distortive tax” that places an impost on a small number of Australia’s largest taxpayers, adding that Westpac and its shareholders must “continue to agitate for its removal”.
“It discriminates against Australian banks relative to global peers and it has impacted the value of your investment and the investments of millions of superannuation holders across Australia,” Mr Maxsted said in Westpac’s annual report.
Slow learners these banksters. Let me explain, yet again, why the banking levy is justified.
The major banks benefit from an implicit guarantee from the taxpayer, which the RBA estimates is worth between 20 and 40 basis points a year, or more than $5 billion. This guarantee is why the big banks receive a three notch ratings upgrade on the smaller banks, who are not considered to be government-guaranteed.
The bank levy ensures that the major banks will give back only 0.06% of this subsidy, or $6.2 billion over a four year period ($1.55 billion a year). Thus, the major banks are still ahead each year to the tune of somewhere like $3.5 billion.
Does Lindsay Maxsted or his rent-seeking mates seriously believe that the major banks should be allowed to receive billions in taxpayer support annually without paying a cent for the privilege?
When you or I take-out insurance, we are required to pay. So why shouldn’t the banks? The bank levy is efficient precisely because it helps to internalise part of the cost of the Government’s support.
For a well-thought assessment of the bank levy, I highly recommend that you listed to The Australia Institute’s latest “Follow the Money” podcast: Episode 19 – why a bank levy is a great idea.
The arguments therein are far more compelling than those put forward by Lindsay Maxsted and his fellow banksters.