There’s a report in the AFR today that the Federal Government is planning a tax on bank deposits at the May budget which could raise about $500 million a year.
The government is reportedly moving ahead with the bank deposits insurance levy which was first flagged by the former Labor government as a way to force banks to hold extra capital as a security policy. The tax aims to ensure a bank’s equity levels are sufficient to safeguard the financial system in a time of crisis.
It was one of the key recommendations handed down by David Murray’s Financial System Inquiry late last year.
At the time Murray said that while it can’t be “bullet proof”, Australia needed to prepare to withstand “plausible shocks” and using higher capital levels as a safety buffer was one way to achieve that.
Money raised would be put in a Financial Stability Fund which could be used to protect depositors if a bank was to collapse. The fund would also be used to offset gross debt.
When Labor proposed this tax it took the form of a 0.05% levy on every deposit up to $250,000 and was forecast to raise $733 million in its first 18 months.
But banks have said it’s a cost which would likely be passed onto consumers. ANZ CEO Mike Smith said the tax would hit depositors.
“Why impose another tax on the savings of the elderly and retired? I don’t understand this. It’s not well thought-out,” he told the AFR.
There’s more here.
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