CEOs crit­i­cise levy, say share­hold­ers and cus­tomers will bear cost

New Straits Times - - Business / World - IAN NAREV

SYD­NEY: The heads of Aus­tralia’s big­gest lenders have slammed the gov­ern­ment’s A$6.2 bil­lion (RM19.9 bil­lion) bank levy, say­ing the cost will be borne by share­hold­ers and cus­tomers.

“This levy is a stealth tax” on Aus­tralians’ sav­ings, said West­pac Bank­ing Corp chief ex­ec­u­tive of­fi­cer (CEO) Brian Hartzer in an emailed state­ment.

“There is no magic pud­ding. The cost of any new tax is ul­ti­mately borne by share­hold­ers, bor­row­ers, de­pos­i­tors and em­ploy­ees.”

His com­ments were echoed by Na­tional Aus­tralia Bank Ltd CEO An­drew Thor­burn, who said the levy “will im­pact mil­lions of ev­ery­day Aus­tralians who are em­ploy­ees, cus­tomers or share­hold­ers of banks”.

“A tax can­not be ab­sorbed. “This tax is borne by these peo­ple. It is not pos­si­ble to im­pose a tax with­out an im­pact on peo­ple and, there­fore, the wider com­mu­nity,” he said in a state­ment.

Com­mon­wealth Bank of Aus­tralia CEO Ian Narev also crit­i­cised the gov­ern­ment for not con­sult­ing the banks be­fore an­nounc­ing the plan, which he said lacked de­tail.

“Ev­ery ex­tra cost needs to be borne by cus­tomers or share­hold­ers, or a com­bi­na­tion of both.”

Aus­tralia & New Zealand Bank­ing Group Ltd said it was too early to es­ti­mate the fi­nan­cial im­pact of the levy.

The levy will re­duce fis­cal 2018 earn­ings at the five banks by four to five per cent, ac­cord­ing to Mor­gan Stan­ley an­a­lysts.

The changes “are likely to have a neg­a­tive im­pact upon prof­itabil­ity and the com­pet­i­tive po­si­tion of the five largest banks”, Cit­i­group Inc (Citi) an­a­lysts led by Craig Wil­liams wrote in a note to clients.

Citi re­it­er­ated its “sell” rec­om­men­da­tion on Com­mon­wealth Bank, Mac­quarie, Na­tional Aus­tralia and West­pac.

While the move will bring Aus­tralia into line with levies im­posed in Europe, Hartzer said those were to re­cover the cost of gov­ern­ment bailouts in the wake of the global fi­nan­cial cri­sis.

“No tax­payer funds have been used to prop up the Aus­tralian banks,” he said, adding that coun­tries that im­posed bank levies had much lower cor­po­rate tax rates than Aus­tralia.

The move from the tra­di­tion­ally busi­ness-friendly coali­tion aims to ap­peal to in­debted vot­ers’ anger at banks, which have failed to pass on in­ter­est-rate cuts in full even as they posted record prof­its. Bloomberg

Ev­ery ex­tra cost needs to be borne by cus­tomers or share­hold­ers, or a com­bi­na­tion of both.

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