David Gonski, the chairman of the ANZ Bank, says the new bank tax is further evidence of the breakdown in the banking industry’s relationship with Canberra and the broader community.
In a letter to shareholders, he says: “I want to assure you that ANZ has been working hard to ensure that community trust in banks reflects the crucial role we have in keeping our economy strong and secure.”
The bank levy, on the liabilities of the big four banks and Macquarie, raising $6.2 billion over four years, was announced in the 2017 federal budget earlier this month
“It is not in shareholders’ interests or the national interest that the relationship between banks and the community continues in this way,” says Gonski.
“We clearly have much to do but our aim is to work even harder to help repair the relationship for the good of shareholders and of all Australians.
“We acknowledge that this will require us to think and act differently.”
Based on the current draft legislation and ANZ’s March balance sheet, the banks estimates that the annual financial impact of the levy will be $240 million after tax.
“The net financial impact, including the bank’s ability to maintain its current fully franked ordinary dividend, will be dependent upon business performance and decisions we make in response to the tax,” says Gonski.
“Clearly we are disappointed at the introduction of this new tax. However, given the support it has in Parliament, we accept that it will pass into law.”
The ANZ bank earlier this month posted a 23% jump in cash profit to $3.41 billion for the half year.
The banks don’t like the idea of the levy, a 6 basis point tax on liabilities, saying it was developed without consultation or consideration of the impact on bank customers, shareholders, suppliers, employees or even what it might do to the economy.
They say someone will have to pay for the levy, either shareholders or customers.
The big four calculate they have a combined annual liability for the federal’s government’s new bank levy of $1.38 billion a year before tax – as far as they can work out with the information they have been given.
The numbers show that the new tax will raise the amount estimated in the 2017 federal budget — $1.6 billion a year or $6.2 billion over four — but only as a headline figure.
The after tax number, because the levy is deemed a tax deductible cost of doing business, is $965 million.
The government coffers will essentially take in $1.38 billion from the big four but give back $415 million.
The tax is expected to be paid quarterly, with the first payment being the September quarter this year.
However, all the banks say there are still many unanswered questions as to how the tax will be calculated and paid
None of the banks has decided how to manage the impact on profits.
The easiest is to increase interest rates charged to borrowers and/or reduce the rates paid to savers.
The other way is to pay lower dividends to shareholders.