State Government’s bank tax is ‘misguided, unreasonable’, warns UK investment fund Jupiter Asset Management

THE State Government’s bank tax is entirely unreasonable and misguided, a major investment fund has warned, as the controversial measure shapes as a key State Election issue.

• Koutsantonis strikes $41m bank tax deal with Dignity Party
• Bank tax heads for defeat in Upper House
• $417 million to come from bank tax, modelling shows
• Polling shows support slipping for bank tax

THE State Government’s bank tax is entirely unreasonable and misguided, a major investment fund has warned, as the controversial measure shapes as a key State Election issue.

The warning comes as debate on the tax returns to State Parliament today, with the Bill set to face a difficult passage through the Upper House.

Jupiter Asset Management, a UK fund that manages more than $80 billion in assets, said it had already reduced its exposure to Australia because of its “increased level of political risk” and said they “strongly urge the protagonists to reconsider’’ the bank tax.

The Australian Bankers Association and Business SA also renewed criticism of the tax, which ABA chief executive Anna Bligh said “will discourage investment, put a handbrake on growth and impact jobs’’.

Ms Bligh said she had written to all state MPs ahead of debate on the tax, urging them to vote it down.

SA Treasuruer Tom Koutsantonis. Picture: Bianca De Marchi

“We’ve heard from small business, big business, MPs and South Australian voters who all disagree with the tax — the only ones not listening are members of the Government,’’ Ms Bligh said.

“In a last-ditch effort to have them abandon the plan, I have written to each and every MP outlining the facts.’’

But Treasurer Tom Koutsantonis, has vowed neither to back away from the tax itself, nor split it off from the rest of the Budget.

He is fresh from a win over the weekend when he sealed a deal with Dignity Party MLC Kelly Vincent to support the tax in return for $41 million over four years for disability measures.

“The State Government expects the Budget to be passed in full and will not be separating any measure from the Bill,’’ Mr Koutsantonis said.

“There is a reason why Budget Bills have never been blocked in the state’s history — because governments need to be able to pass Budgets in full to govern effectively.

“If the Liberals block this Bill, they will set a very dangerous precedence for all future State Governments.’’

The bank tax — which will be levied on the big four banks as well as investment bank Macquarie Group — was budgeted to raise $370 million over four years, with that figure increasing to $417 million in the most recent government estimates.

Both the Treasurer and Premier Jay Weatherill have said that, if pressed, they would fight next March’s state election on the issue, and with other upper house crossbench MPs currently adamant they will not support the tax, that looks increasingly likely.

Independent MP John Darley and Australian Conservatives Dennis Hood and Rob Brokenshire were holding firm in their opposition to the tax late Monday, meaning the bank tax — and by extension the entire state Budget — is destined to be blocked.

That may happen as soon as today, depending on how many MPs want to speak on the issue, and for how long.

The Government needs only one extra upper house vote to pass the tax, and as the deal with the Dignity party shows, they are willing to horse-trade on the issue.

If the vote goes against the Government, it will return to the lower house to be debated once again, however wider Budget measures such as a $200 million business support package dubbed the Future Jobs Fund and other business tax cuts — not to mention all other new Budget measures — will remain in limbo.

The Treasurer is sure to pounce on profit figures to be released by BankSA parent Westpac next Monday, following a bumper $1.25 billion half-year profit — up 19 per cent — announced by Macquarie last week.

Business SA chief executive Nigel McBride said it was disappointing that South Australia was attracting international attention for all the wrong reasons.

“The Weatherill Government are protesting that there’s never been better inbound investment, it’s all nonsense,’’ he said.

“The truth is the major investments have been leveraged by government subsidies and taxpayer incentives.”

Mr McBride said any large business which made money in SA would now be wary of being targeted by the Government.

“It’s a dumb tax, it’s an arbitrary tax, it’s a tax by ambush and it’s going to punish all South Australians.”

Deloitte Access Economics’ Investment Monitor, to be released today, supports Mr McBride’s criticism of the State Government’s economic record, saying that the SA economy “faces a number of long-running challenges”.

It shows that in 2016-17, the SA economy grew by 0.7 per cent, which was the slowest rate of growth in five years and well below the 2 per cent national growth in real GDP.

Output was weighed down by a fall in private engineering and commercial construction as well as weak trade figures.’’

While there were some bright spots in the economy, such as retail spending, “overall, South Australia’s economy is still facing a number of significant challenges and is forecast to grow at a slower pace than the Australian economy for some years to come”.

“The trend of strong public sector spending looks set to continue, with the State Government’s

infrastructure program expected to grow from $1.2 billion in 2015-16 to a record high of $2.2 billion in 2017-18.’’

Jupiter Asset Management’s Jason Pidcock said in a statement he saw “sector-specific” taxes as entirely unreasonable and a misguided practice.

“They deter investment and make investors wary and distrustful of the politicians who try to implement them.

“For a single State Government, in this case South Australia, to implement extra taxes on Australian banks, is highly irregular.

“As a UK-based investor into Australia, we see this kind of political manoeuvring as very off-putting.’’

Mr Koutsantonis dismissed the comments.

“If Mr Pidock’s comments were true, how does he explain SA climbing business investment rankings to third of all the states and Tesla, Neoen, Solar Reserve, BHP, OZ Minerals, SkyCity, GFG Alliance and Macquarie Group investing billions in the SA economy in recent months?” he said.

“Economic growth also continues across the nation, despite the introduction of the Federal major bank levy in May.

“In addition to the bank levy, the Budget Bill includes payroll tax cuts of almost $10,000 set to benefit thousands of small businesses, and housing constructing incentives of up to $25,000 for purchasers of off-the-plan apartments.

“If the Liberals and crossbenchers block the Bill, they are blocking all these measures. We are asking them to support thousands of South Australian businesses over five east coast banks.’’

State Liberal Leader Steven Marshall described the fund’s statement as disturbing but unsurprising.

“For months, people have been telling the Weatherill Labor Government that the state bank tax will harm investment and job creation,” he said.

“Unfortunately, South Australia has a Labor Premier and Treasurer who are more interested in political games than supporting employers and investors.

“We are completely opposed to this massive new tax which will be paid for by South Australians.

“South Australia needs a government that will create the right environment for investment and job creation, not massive new taxes.”