ABA rejects Greens call for retirement savings tax
Sydney, 8 March, 2013: The Australian Bankers’ Association (ABA) has rejected calls by the Greens for a super profits tax on banks1 as this would effectively amount to a tax on Australians’ retirement savings
Steven Münchenberg, Chief Executive of the ABA, said: “The majority of bank profits are 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.”
“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.”
“The other impact of the Greens policy would be that banks may need to pass on higher costs to consumers because of the need to maintain profitability. So consumers may end up paying more for banking products and services.”
“By taxing bank assets, which are effectively loans, the tax would make lending to parts of the economy much less profitable and, therefore, make it more difficult for those parts of the economy, including small businesses, to get finance.”
Critics fail to acknowledge that the banking sector already makes a large contribution to the Government’s finances.
The Australian Government received 27% of bank profits through taxes over the three years ending 2012. Indeed, banks contribute more corporate tax than any other industry in Australia.
In the past five years, banks have paid over $40 billion dollars in tax, plus an additional $3 billion for the government’s bank funding guarantee.
Some critics claim that banks’ profits are excessive but the facts don’t support this contention.
Mr Münchenberg said: “Banks’ profits are not excessive, especially when you compare them to other companies. Bank revenue appears large for the simple reason that the banking sector is large. The task of transforming savings into investment now constitutes the largest business sector in Australia, even larger than mining and manufacturing.”
“When viewed against the size of its asset base, bank revenue is reasonably low. Revenue was only about 7% of total bank assets. Profits represented less than 1% of banks’ assets.”
“In 2011, only two of the major banks made the list of Australia’s 50 most profitable companies when measured on a return on equity basis and those banks are ranked near the bottom of this league ladder, not at the top.”
“Media reports note that the Parliamentary Budget Office has estimated that the tax would raise $30 billion in 2016 – 17 which is more than the combined profits of the major banks today.”
The ABA supports considered measures to enhance competition for smaller banks and other participants in the financial services industry.
Measures to do this include:
- Improving access to funding and securitisation for smaller banks and other lenders;
- Broader access to markets and tools such as securitisation, covered bonds and senior unsecured term funding; and
- Provide tax incentives on savings that are material and sustained.
Mr Münchenberg concluded: “This populist Greens policy could end up hurting our economy. Solid bank profits are crucial for Australia’s long-term economic stability and to secure jobs growth. Bank shares are a mainstay of super fund investment given the stability of earnings and relatively high dividends and these returns help people saving for their retirement or earn income when they have left the workforce.”
For further information:
Heather Wellard, ABA PR,
Phone: 02 8298 0411, Mobile: 0409 830 439 @austbankers
1.The ABA was responding to reports in the media -“Greens want banks to pay for protection” by Mark Kenny, “The Age”, p 8; “Greens call for super tax on big four banks” by Mark Kenny “The Sydney Morning Herald”, page 1; and “Greens want new levy on big banks” by Mark Kenny, “The Canberra Times”, page 8.