MPs warn laws imposing new bank tax would allow big five to indirectly pass on cost to customers

LAWS to impose a new state tax on the major banks do not prevent them from indirectly passing on the extra cost to customers, MPs warn.

• SA Budget 2017: Big Five banks to be hit with new state tax.
• Australian Conservatives will move to scrap bank tax in Parliament.
• BankSA pulls plug on 150 new jobs, blames bank tax.
• Bankers launch advertising blitz against new state tax.

LAWS to impose a new state tax on the major banks do not prevent them from indirectly passing on the extra cost to customers, MPs warn.

It comes as the Australian Bankers’ Association steps up its campaign against the tax, arguing banks contributed more than $14 billion in tax to governments last year.

This included about $1 billion for state and local governments collected through payroll tax, land tax, council rates and other taxes.

Introducing the state bank tax as part of his 2017-18 State Budget, Treasurer Tom Koutsantonis said he would enshrine in law that it could not be passed on in higher fees for customers.

The Budget Bill states that the tax, which mirrors a federal model announced in May, “cannot be directly recovered from customers” and “must be paid out of profits or other funds” of the Big Four banks and Macquarie Group.

However, Australian Conservatives MP Robert Brokenshire said the legislation did not prevent banks from indirectly passing on the cost of the tax under another guise.

ANZ and other big banks have campaigned against the South Australian Government’s new bank tax.

“The way this (legislation) is drafted it gives every opportunity for the banks to recover this indirectly from customers,” he said.

“If they (Government) were serious about protecting customers ... they also would have had penalties to enforce that.”

Opposition Deputy Leader Vickie Chapman agreed and warned that personal loans and credit contracts, such as for the family car, would “inevitably cost more” as a result.

“It is laughable that the Treasurer is telling the public that ... the Bill will sufficiently protect South Australians from having increased fees and charges,” she said.

“The most financially disadvantaged in society will be indirectly handed the bill for this levy through higher interest rates for loans and lower interest rates for our deposits.”

SA Treasurer Tom Koutsantonis says the new tax represents just 0.3 per cent of the big banks’ profits.

However, Mr Koutsantonis argued that the major banks did not increase fees to customers to recover the federal tax – on which he modelled the state version.

The federal tax is expected to collect about $1.6 billion in revenue.

“Given that the (state) levy represents 0.3 per cent of the banks’ $30 billion in super profits, I would suggest they can cover the cost from those profits with a negligible effect,” he said.

“The five big banks know that if they follow through on threats to charge South Australians higher interest rates they’ll lose their customers to smaller banks and credit unions who are not subject to the tax.”