The Commonwealth Bank of Australia has warned that the Government's proposed new bank levy will unfairly penalize customers and shareholders and have a negative impact on investor confidence.
Treasurer Scott Morrison announced at last week's Budget that on July 1 the Government will introduce a six-basis levy on Australia's five largest banks with liabilities of more than AUD100bn (USD74.2bn). The Government expects the levy to raise AUD6.2bn over the forward estimates period.
In its submission to a Treasury consultation on the measure, Commonwealth Bank said: "We were surprised to see the sector singled out for this levy; and we remain very concerned at the speed with which the levy is being introduced, and the significant risk of unintended consequences that could impact the stability and effectiveness of the banking system."
The submission said that Commonwealth Bank is the largest taxpayer in Australia. It paid AUD3.6bn in tax last year. It added that the bank is responsible for 20 percent of all business lending in the country, and for eight percent (AUD148bn) of shareholder wealth accumulated in Australia.
It warned that the cost of the levy "will be unfairly borne by families and businesses who are our customers and shareholders."
The submission added that the bank has been advised that the levy is intended to be permanent, and stressed that this "will even more significantly penalize our customers and shareholders for dealing with, and investing in, us."
Commonwealth Bank recommended that any future Budget surplus should trigger a review of the levy and should result in its abolition. At the very least, the bank would like the Government to ensure that the levy can be set to zero at the right time. Likewise, it suggested that the Government set the levy at a fixed rate, rather than vary it year by year according to the scale of the budget deficit.
The submission said that the announcement of the levy has already undermined investor confidence in Australia's banking system, with a stock market sell-off of banking shares wiping "AUD14bn from the wealth of hundreds of thousands of shareholders" on Budget day. It claimed that, as the levy is not intended to apply to overseas-owned multinational banks, they will be able to compete more aggressively for deposits. It said the levy must be applied to overseas banks, to ensure a level playing field.
Regarding the levy's scope, the submission recommended that it be targeted at funding liabilities (namely, funding which leverages the balance sheet), and exclude non-funding liabilities and the liabilities of both foreign branches and foreign subsidiaries of Australian banks.
Commonwealth Bank also argued that the proposed start date for the levy is "not only ambitious but risks poor implementation and ultimately implementation failure." It said the introduction of the legislation should be delayed to the end of September.