Greens' levy on big banks would bring in $11 billion

A GREENS proposal to slap a 0.2% levy on the assets of Australia's big four banks would add $11 billion to the budget bottom line over the next four years.

But the Parliamentary Budget Office, which costed the proposal for the Greens, predicted the banks would change their "behaviour" to avoid paying the levy.

Based on Australian Prudential Regulation Authority data only Westpac, NAB, ANZ and the Commonwealth would be subject to the levy, which would apply to residential assets of more than $100 billion.

These banks posted a $33 billion profit between in the past year and paid combined $9.6 billion tax.

The PBO said the proposed levy would represent a "significant impost" on the big four banks.

"The costing ... assumes that the imposition of the levy does not change the behaviour of Australian banks or their customers, for instance by moving business offshore, restructuring banking businesses to get under the asset threshold or shifting business away from banks subject to the levy to those that are not subject to the levy," the costings document released by the Greens on Friday read.

"Such an increase in tax liability is likely to result in a behavioural response. The actual behaviour of the major banks in response to the levy could materially affect the costing."

The PBO, which described the reliability of the costings as "high", made the point competition from other, smaller lenders would limit the ability of the big four banks to pass the increased costs on to customers.

If adopted in the 2013-14 Federal Budget the levy, which would be paid by each of the banks in a single instalment, would generate $2.5 billion in its first year before increasing incrementally to $3 billion in 2016-17.

The levy would generate $15.8 billion in revenue over the forward estimates, but as it would be treated as a tax deduction for the banks, would reduce company receipts by $4.7 billion.

Greens Deputy Leader Adam Bandt argued the "public support levy" was only fair given the "obscene profits" being generated by the banks.

He said the big four were "rolling in it" and could "afford to take a hair cut and give something back to the Australian community".

"As we get close to the budget Labor is going to have a pretty clear choice. We either have the guts to stand up the big miners and the big banks and ask them to pay a fairer share, or they're going to start cutting services ... or raise the taxes that the rest of us have to pay," Mr Bandt said.

Mr Bandt said the levy mirrored similar levies in Europe and was based on International Monetary Fund proposals.

Not surprisingly the Australian Bankers' Association (ABA) rejected the Greens' proposal, describing it as a "populist policy" that would damage the economy and amount to a tax raid on Australians' retirement savings.

ABA chief executive Steven Münchenberg said the bulk of bank profits were paid through dividends to "mum and dad shareholders" and superannuation funds.

"Taxing banks' profits reduces those returns for working Australians saving for their retirement through superannuation accounts and to retirees who are increasingly dependent upon positive business profit growth," he said.

"Last year, banks paid out a record $19 billion in dividends - 7% more than 2011. In the past five years, banks have paid out $82 billion in dividends."

Mr Münchenberg said the banks would have no choice but to pass on the costs to consumers "to maintain profitability".

And he said the fact the Greens' policy was based on a European idea should be cause for alarm.

"We need to be very careful about importing ideas from the very countries where banks failed during the global financial crisis and had to be bailed out with taxpayers' money," he said.

"Economies in Europe are still experiencing deep recessions, high unemployment and in some cases - social unrest. In comparison, Australian banks withstood the global financial crisis, continued lending and accepting deposits, which helped support our economy during that difficult period."


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