Chris Bowen has described as “reverse protectionism” the Turnbull government’s decision to impose a bank levy on Australia’s big banks without imposing it on major foreign banks.
Labor’s treasury spokesman said the complaints from the big five Australian banks about foreign competitors escaping the bank levy was a legitimate issue for consideration by the expected Senate inquiry.
“If the government says it is about competition, why are big foreign banks exempt that are operating in Australia, that are competing with Australian banks? It could be called reverse protectionism,” Bowen said in an address to the National Press Club.
Bowen also agreed with the banks that a three-month delay in the implementation of the tax – yet to pass the parliament – was reasonable.
The government has argued the levy is needed to contribute to budget repair and to ensure greater competition in the finance sector – which Bowen broadly agreed with on Wednesday.
But Malcolm Turnbull has ruled out expanding the bank levy to foreign institutions and accused the big banks of seeking to delay the implementation of the $6.2bn tax.
Asked whether the bank tax would be expanded to cover foreign banks, the prime minister said he wanted to deliver on the commitment made in the budget.
“I can understand why the big banks would want to delay that or resist it, but we need to proceed with this,” Turnbull said. “It is vitally important to return the budget to balance and it is a fair contribution that we are asking the banks to make.”
Bowen said he would not quibble with the bank levy as a revenue measure given the fiscal situation.
“We’ve got to pick our fights with the government and I won’t pick a fight over this, the budget can’t afford a fight over this,” Bowen said.
The treasurer Scott Morrison has urged the banks to “pony up”, contribute to budget repair and absorb the levy rather than pass it on to customers even though the banks say all costs have to be passed on to customers or shareholders.
Bowen said he believed the banks’ warning that they would seek to pass on the cost.
“It is the treasurer and prime minister who say the banks won’t pass it on,” Bowen said. “The banks say they will pass it on. I tend to think...if they say they will pass it on, they probably intend to.”
And Liberal MP Rowan Ramsey said if funds were taken out, shareholders would suffer.
“It makes sense if you take something out of the bank, they will show less profit,” Ramsey told the ABC. “That’s an absolute given.”
Labor supports a Senate enquiry into the legislation to examine protections for customers. Nick Xenophon has called for the levy to apply to foreign banks of a similar size operating in Australia. This would include BNP Paribas, ING and HSBC.
Banks expect to see bank levy legislation on Wednesday and were told they had 24 hours to respond to the legislation.
“The banks I think make the point that they’re competing with foreign banks in Australia, very large foreign institutions who aren’t paying this tax, and they are now at a competitive disadvantage to those large foreign institutions,” Bowen said earlier.
“They can put that case, and it’s up to the government to justify why they didn’t include the foreign banks in this decision.”
The big five Australian banks – who all saw their shares fall on Wednesday – are fighting the levy but the chief executive of the London-based Clydesdale Bank, David Duffy, said Britain’s biggest banks did not pass on the costs of the UK’s major bank levy to customers.
The Clydesdale Bank is a spin-off of the National Australia Bank. Duffy said that when the British levy was imposed, the banks “simply absorbed it and moved on”.
“You certainly didn’t see them passing it on to customers. They dealt with it through other measures such as cost management,” Duffy told the Australian.
