A Greens senator has warned the Coalition’s $6.2bn bank levy could raise $1.5bn less than expected over four years, given the cost is tax-deductible.
Analysis by Tasmanian senator Peter Whish-Wilson, a former banker, suggests the amount raised could be almost quarter less than expected over the next four years.
His analysis shows that while the levy of 0.06% on the big five banks would raise $1.56bn a year on 2015 Australian Tax Office figures – as outlined in the budget – once deductibility was taken into account, money raised would drop to $1.17bn.
“The big banks have reaped billions because of the implicit and explicit guarantees that the government provide them,” Whish-Wilson said. “These guarantees means that the big banks can take bigger risks and make more money but it is the public who gets left with the mess if the shit hits the fan.
“Once you take into account that the new levy is tax-deductible, no individual bank will have to pay more than an extra $320m per year in additional taxes and levies.”
The Australian Bankers’ Association disputed the claims that the levy might raise less than $6.2bn over four years.
“The major bank tax is like many levies in that it is tax-deductible but the ABA has confirmed with Treasury that the $6.2bn figure in the budget is how much banks will pay in net terms,” an ABA spokeswoman said.
The budget papers say: “The levy will raise $6.2bn over the forward estimates period, net of interactions with other taxes (principally corporate income taxes).”
A government spokesman said the $6.2bn was the amount the tax would raise after the levy had been deducted.
The levy has left the Turnbull government in a fight with the big five banks, which has seen the former Treasury boss Ken Henry (now National Australia Bank chairman) call for an inquiry into the tax. Labor is supporting the inquiry.
The government has characterised the tax as a payback for the implicit guarantee given by the commonwealth for the large banks because such institutions are too big to fail.
During the global financial crisis, the Rudd government guaranteed between $600bn and $700bn in deposits to ensure there was not a run on the banks.
The International Monetary Fund and the Reserve Bank of Australia have estimated the cost advantage of such implicit guarantees is worth 20 basis points. The bank levy is six basis points.
On Tuesday, Malcolm Turnbull said the Australian Prudential Regulation Authority was fully consulted before the budget measure, as the big banks accused the government of policy on the run.
“The banks do get a very distinct advantage from the support of our very stable financial system and the support of government,” Turnbull said. “So it is fair for them to make a contribution, as indeed banks do in many other parts of the world.”
Whish-Wilson said the levy was similar to a Greens policy taken to the last election for a levy of 20 basis points, which would have raised $14.9bn over the forward estimates, according to the parliamentary budget office.
“A fair and properly designed too big to fail levy, as proposed by the Greens and organisations such as the IMF, would raise three times as much,” he said.
“If we don’t raise new revenue from the incredibly profitable banking sector then, given the track record of the government, it will be every day Australians who will have to make up the difference.”
