The head of the Commonwealth Bank has criticised the Turnbull government at a business gathering in Perth, saying the government’s argument that its $6.2bn bank levy can be “absorbed” by the banks is senseless.
Ian Narev, the CBA’s chief executive, said the Coalition was targeting the banking industry because it was successful, and warned other industries could be next if they became too profitable.
Speaking at the Australia-Israel chamber of commerce lunch on Wednesday, Narev said the levy had damaged trust in the government, and constant attacks on the banking industry had reached a critical point.
“We are not pushing back so strongly simply because of the dollars,” he said. “We are pushing back because of the principle and the impact on the economy.”
Although CBA sources have privately conceded the levy will pass parliament given Labor’s support, Narev said Australians must understand who will bear the cost.
He has begun to build the case to have the levy removed once the federal budget is returned to surplus after 2021.
He also showed the audience a graphic to illustrate where the bank’s income is being distributed. The levy will hit the bank’s after-tax income.
“The essence of this debate lies in the terms ‘They can absorb it, they are very profitable,’ ” Narev said. “And the question we need to ask is: who is ‘they’?
“And the answer ... is ‘you’. They is ‘you’. They is us.”
He said CBA generated income of $13.1bn in the six months to December 31, and that income was distributed variously:
- $3.1bn to pay the salaries of 50,000 staff
- $2.6bn to pay more than 5,000 small businesses that provide CBA with goods and services
- $0.6bn lost on bad loans (the loan impairment expense)
- $1.9bn paid in taxes
- $1.5bn for reinvestment
- $3.4bn paid in dividends to shareholders.
“That is the sum total of ‘they,’ ” he said.
“What’s critical about this debate – and that we need to do a better job of explaining – is the impact, no matter where a new tax arises, no matter where it ends up, it must end up in one of these places.
“This is a critical part of understanding what has happened, and also part of understanding what it is I heard from a couple of clients early on this morning.
“If it’s going to happen to the banks while the banks are successful, who will it happen to next time they’re at a budget gap?
“Well, they’ll walk to whoever the next successful industry is, because they can absorb it too.”
It was the latest salvo in the major banks’ fight against the levy, which was announced in budget with little consultation.
The government said its levy would raise $6.2bn in revenue over four years, applied to the Commonwealth Bank, Westpac, NAB, ANZ, and Macquarie.
But Deutsche Bank and Morgan Stanley analysts have warned the revenue collected could fall half a billion dollars short this year.
Their warning came after the big four banks told shareholders how much they thought the levy would cost them over the next 12 months.
Westpac warned it would cost $260m after tax, Commonwealth Bank $220m, NAB $245m, and ANZ $240m.
It brought the collective cost of the levy to $965m over the next year.
