At least one major bank believes Treasury has miscalculated the new levy on banks and says it will not raise the $1.5 billion a year as forecast in last week’s budget.
Speaking on condition of anonymity, a senior industry source said it was apparent after initial scrutiny of the draft legislation presented to the banks on Wednesday, that the revenue projections would fall short. He could not say by how much.
“We don’t think the Treasury has done their sums on this,” he said.
Should this assessment prove to be correct, the government, which has budgeted for the tax to earn $6.2 billion in the first four years, will either have to adjust the 0.06 per cent rate of the tax, change the formula, or also apply the tax to foreign banks as the federal Opposition and the Australian banks are recommending.
The government was split on the issue of foreign banks on Thursday. Prime Minister Malcolm Turnbull has publicly ruled it out and Treasurer Scott Morrison is also understood to be opposed, but Assistant Treasurer Michael Sukkar said it remained a possibility.
“I’m not going to rule it in or out other than to say consultations are occurring and in the next sitting fortnight you will see the legislation that has been well thought through and, as I’ve said, any good ideas along the way we will look at,” he said.
In an attempt to quell the rising revolt from the major banks, Mr Morrison adopted a strategy of divide and conquer by urging one of them to break ranks and declare publicity it will not pass the cost on to customers.
“The first bank to break ranks and say ‘no, we’re not going to insult the Australian people, we’re going to do the right thing by the Australian people’, I think they will get a lot of support from Australian customers,” Mr Morrison said.
The government has tasked the Australian Competition and Consumer Commission to monitor attempts by the banks to pass on the tax but ACCC chairman Rod Sims conceded “we don’t have power to stop the banks from doing anything”.
Mr Morrison also tried to wedge the Australian Bankers’ Association by noting chief executive Anna Bligh, who is leading the assault on the government, also represented the small banks, most of which support the tax, because it helps even the playing field.
“She also works for the smaller banks who don’t seem to be getting a voice,” Mr Morrison said.
Ms Bligh accepted there were differing views in the ABA but the association later released a statement denying any split.
She issued an angry statement on Wednesday after the government forced bank executives to sign confidentiality agreements before receiving the draft legislation for the tax.
Whose side is Chris Bowen and Labor on? Bank customers or the Big Banks?
— Scott Morrison (@ScottMorrisonMP) May 18, 2017
In defending the move on Thursday, Mr Morrison noted pointedly that the gag order also prevented the government from disclosing the various responses of the banks and that they were not united in their opposition to the tax.
He said the banks should be grateful the revenue raised by the tax has helped preserve Australia’s AAA credit rating.
He noted that NAB had warned before the budget that a credit rating downgrade would be the equivalent of a 10 basis point hit on the sector, something the banks said they could absorb. Yet the levy was just a 6 basis points hit and the banks are declaring “the end of the financial system as we know it”.
Shadow treasurer Chris Bowen attacked Mr Morrison over the secrecy.
“The Treasurer is desperate to try and turn a measure that enjoys public support and support from other political parties into a stinker through appalling stakeholder management and secrecy.”
Mr Morrison responded: “Whose side is Chris Bowen and Labor on? Bank customers or the Big Banks.”
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