The bank lobby has attacked the Turnbull government for forcing senior major bank executives to sign confidentiality agreements before they are allowed to view the legislation that imposes a planned $6.2bn levy.
In a further sign of deteriorating relations between the Turnbull government and the big banks, the Australian Bankers’ Association’s chief executive, Anna Bligh, says the move prevents banks from consulting with their boards, shareholders and customers.
Bligh said the non-disclosure agreement effectively made it illegal for the bill to be “tested in the public sphere”.
“A bad tax has now become a secret tax,” Bligh said in a statement. “The government is going to extraordinary lengths to keep this tax hidden from the people who will be most affected by it and from the public.
“How can Australia’s major banks determine the impacts of this legislation if their senior staff and analysts are in danger of being prosecuted if they speak to stakeholders, the public or the media?”
Bligh said the policy process, which was already bad, had worsened and, as a result, it would lead to highly flawed legislation that would present further risks to the economy and financial system.
But the treasurer, Scott Morrison, said the non-disclosure arrangements were a regular practice and did not restrict the banks from circulating any material within their organisations, including with their boards or commercial advisers.
“The non-disclosure arrangements used in this case are not an irregular practice for governments when consulting with commercial entities over draft legislation, and have been used recently by the Turnbull government for the multinational anti-avoidance laws and the diverted profits tax,” Morrison said.
He said Labor used confidential consultations on transfer pricing in 2012-13 and the corporate integrity package in 2013-14.
“The major banks have made individual submissions to the government and we are respecting requests made for confidentiality of the submissions, including any subsequent comments they may provide,” Morrison said.
The legislation would be introduced to the parliament in the upcoming sitting fortnight when it would be open to full scrutiny, Morrison said.
The government bill has the support of Labor but will be subject to a legislation committee inquiry in the Senate.
Also on Wednesday, Labor’s shadow treasurer, Chris Bowen, said big banks had a legitimate point that it was unfair of the government not to impose the tax on large foreign banks operating in Australia – a decision he labelled “reverse protectionism”.
Bowen would not rule out Labor supporting the bank levy expansion over foreign banks, a move also supported by Nick Xenophon.
The latest development has further antagonised the big five banks but the government has won the support of second-tier banks and smaller banks, including $70bn Bendigo Bank, whose CEO, Mike Hirst, is also deputy of the ABA.
He said the implied government guarantee for the big four banks – on the grounds they are too big to fail – means they can access wholesale funding cheaper than smaller banks.
“We think the levy goes some way to levelling the uneven playing field,” Hirst told Guardian Australia. “[The big banks] have been estimated to get an unearned benefit of $3.8bn from the implied guarantee and the levy is only $1.5bn.”
He said that during the global financial crisis the big banks were seizing maximum market share and smaller institutions were losing business.
“There fact is there has been a lot of regulatory advantages that major banks have received since 2007 so whilst I great empathy for having something sprung out of blue, nevertheless there have been a fair few free kicks going one way and while this levy goes against that, it doesn’t even it up,” Hirst said.
The ME Bank CEO, Jamie McPhee, said the implicit government guarantee to big banks translates into an explicit advantage valued at $4bn every year. He said the big banks entered the GFC with a market share of 60-plus% and finished the GFC with close to 80% market share.
“As part of the business community, ME typically argues for lower corporate taxes, not higher,” he said. “However in our industry, smaller banks are disadvantaged considerably by the major banks’ ‘too big to fail’ status, which provides significantly cheaper funding as investors factor in the likelihood of support in the event of a failure.
“The benefit is estimated to be worth around $4bn year. The new levy will reduce this taxpayer provided benefit to some extent and, therefore, further level the playing field”.
He said that, under the current rules, the big banks were getting an insurance policy for free.
Tony Abbott told 2GB Radio on Wednesday that “banks are always an easy target” but it was important to get the policy right.
“No one should want to increase taxes, even on banks,” he said. “Nevertheless, as the treasurer has been saying, the money has got to come from somewhere.
“So look I can certainly understand the banks fighting back, why wouldn’t they? But, on the other hand, the government has brought down a budget.
“The last thing the government can do is see the budget unravel within a couple of weeks of it being brought down, so I think we’re going to see this fight going on for some time.”
Asked whether banks could afford to pay the $6.2bn levy from their $32bn profit, Abbott noted they already pay “tens of billions” of dollars in company tax.
“You can understand, A, why the treasurer thinks they’re in a position to pay and, B, why [the banks] think ‘Well we’re doing our bit already’.”
Asked where he stood on the budget, Abbott replied: “I am a member of the government – obviously the budget was prepared by the prime minister and the treasurer not by backbenchers from Warringah but, as a member of the government, I support the budget that was brought down.”
