SA tax opens box of pain for banks

THE states could squeeze more than $1 billion a year from the big banks if they all introduced versions of South Australia’s bank tax, financial analysts have said.

The SA Treasurer, Tom Koutsantonis, raised eyebrows and the ire of banks late on Thursday when he introduced the tax in his budget for the coming financial year.

Analysts declared Pandora’s box was “officially open”.

The SA tax is forecast to raise $370 million over four years. Analysts said NSW could collect $495 million a year with a similar tax. Victoria and Queensland could reap almost $350 million a year.

They said further increases to the Turnbull Government’s bank levy “cannot be ruled out”, raising the risk of more home loan interest rate rises and cuts to dividends.

Legal experts said the SA tax, effectively a miniature version of the Federal Government’s $6.2 billion levy on the big four lenders and Macquarie Group, could be ruled unconstitutional.

It is projected to emulate the national version and kick in next Saturday.

SA Budget papers say the tax take will be based on the state’s contribution to national gross domestic product, rently about 6 per cent.

Applying a similar method for Victoria — which contributes about 22.5 per cent of Australia’s GDP — would deliver a $348 million annual bounty to Spring St.

Over four years the state would stand to collect almost $1.4 billion.

NSW, which this week unveiled a $4.5 billion budget surplus for the year to June, could expect to raise $1.98 billion over four years using the same approach, while Queensland would pocket $1.17 billion.

As banks railed against the SA tax, with Westpac labelling it a “disgrace”, analysts said cur- further copycat moves could not be ruled out.

In a note for investors, UBS banking analyst Jonathan Mott said the “cookie jar is already being raided”.

It was “possible the other states may follow SA’s lead”.

“Additionally, with the federal election 12-18 months away, further increases in the federal bank levy cannot be ruled out, especially if the Australian Budget remains under pressure,” he said.

But any state considering such a move could expect a sharp response from lenders, possibly through state-specific mortgage and business lending rates or credit rationing.