The Australian Bankers' Association (BBA) has described the Government's proposed new bank levy as a bad policy introduced in haste, and said banks have only until May 15 to make submissions to the Treasury on the tax.
On May 9, Treasurer Scott Morrison announced a six-basis point levy on Australia's five largest banks with liabilities of more than AUD100bn (USD73.7.bn) The levy will enter into force on July 1, and the Government expects it to raise AUD6.2bn over the forward estimates period.
The BBA said that the Treasury held a meeting with industry representatives on May 10 to discuss the policy. It claimed that the Treasury failed to address more than 20 important issues concerning the measure. These issues included: the basis on which the Treasury calculated the AUD6.2bn estimate, how the tax would affect transactions between the five banks and the Reserve Bank, and which of the banks' commercial activities will be captured by the tax.
The BBA said that the meeting was the first time banks had been consulted on the new tax. It added that banks have been given until midday on May 15 to make submissions to the Treasury, and that the Treasury had confirmed that it would provide draft legislation next Wednesday, but would not release the legislation for public consultation.
BBA CEO Anna Bligh said: "Serious questions need to be asked about the indecent haste with which this new bill is being shoehorned into Parliament in a way that will avoid normal drafting and review processes and the scrutiny that should accompany such a critically important piece of legislation."
The measure has also been criticized by the individual banks affected. The Westpac group argued that it was a stealth tax on Australian's savings and the shares in their superannuation accounts, and said it will make Australian banks less competitive. CEO Brian Hartzer warned: "There is no 'magic pudding.' The cost of any new tax is ultimately borne by shareholders, borrowers, depositors, and employees."
Ian Narev, CEO of Commonwealth Bank, sounded a note of caution. He said: "As with the many recent new regulatory imposts, we need to take some time to work through the implications. This is particularly so given the lack of detail and the absence of any consultation."
However, he did add that, "as every business owner or employee knows, every extra cost needs to be borne by customers or shareholders, or a combination of both."
Treasurer Scott Morrison has argued that the banks could absorb the cost. In a question and answer session after his post-Budget speech to the National Liberal Club on May 10, he said that the tax would raise AUD1.5bn a year, "and there's an annual profit of those banks combined of more than AUD30bn."
"Give me a break – that's what Australians will be saying," he said.