Big banks threaten to pass on 'surprise tax' costs to customers

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There is much speculation that consumers will bear the cost of the Turnbull Government’s ‘surprise’ 0.6 per cent tax on Australia’s big banks, with the banks threatening to band together to fight the measure.

The measure is expected to raise $6.2 billion over four years but, it seems, no one is sure exactly how this will occur.

A meeting between banking representatives and Treasury officials in Canberra this week has done little to clear up this uncertainty, with government representatives unable to answer a range of questions about how the proposed tax will work.

“The Government’s attack on the major banks is now fraught with even more uncertainty after bank representatives left a meeting with Treasury officials this morning with more questions than answers,” said Australian Bankers’ Association CEO Anna Bligh.

“For example, they were not able to explain how they had reached the $6.2 billion estimate of revenue from this proposed tax. They were unable to answer a range of very important and very complex questions. It seems that not only were banks kept in the dark on this tax, but perhaps Treasury officials have been kept in the dark up until now.

“There is no doubt that this policy was rushed into the budget at the last minute as a smash-and-grab for money to fill a hole. What is even clearer today is that many of the policy parameters are still uncertain, basic question cannot be answered.

“Banks left the meeting today unable to make any determination about which parts of their banking activities would be subject to the tax, and they are therefore unable to yet determine what it will mean financially for each bank.

“This is emerging as a shambles for the Government. The government has clearly not taken into account the very complex issues that surround the mechanisms of banking every single day in this country.”

Banks have warned that extra costs imposed upon them will be passed onto their customers.

Commonwealth Bank Chief Executive Ian Narev stated that “every extra cost needs to be borne by customers or shareholders, or a combination of both”.

But Treasurer Scott Morrison said he will ask the Australian Competition and Consumer Commission to monitor any unfair cost increases to customers.

“We’re getting the competition watchdog to ensure that the banks don’t lie to Australians about any costs they impose on their customers,” he said.

ANZ CEO Shayne Elliott called the proposal a “regrettable policy”, saying the measure will end up being a “tax on the millions of ordinary Australians who are bank shareholders and bank customers”.

“The cost of any new tax is ultimately borne by shareholders, borrowers, depositors and employees,” claimed Westpac CEO Brian Hartzer.

However, Mr Morrison says it is a “fair tax that will help us deliver the important services that Australians rely on”.

“I’d also make the point that the levy doesn’t apply to the smaller and regional banks so I encourage Australians to shop around if they’re not getting a competitive mortgage rate from the big banks,” he added.

Consumer group CHOICE says that the banks’ reaction is “juvenile” and has called on them not to pass on the extra tax to consumers, or the banks may face a mutiny.

“If you are with one of the big five banks and they punish you by passing on the levy, your best option is to ditch them for one of the 135 other deposit taking institutions in Australia,” said CHOICE CEO Alan Kirkland.

“The banking industry’s juvenile reaction to this levy speaks volumes about these very powerful and profitable companies that are completely out of touch. It also points to a genuine lack of competitive pressure in this highly concentrated market.”

“From punishing mortgage holders with out of cycle rate hikes, to outrageously high credit card interest rates, to the financial advice and insurance scandals that have left consumers out of pocket, the banks have destroyed the public trust and confidence that they once enjoyed.

“One challenge for consumers looking to switch is making sure that you aren’t with a sub-brand or product still connected with a big bank. The big banks hide behind brands like Financial Wisdom, Bank of Melbourne and white-label home loans so you could be with a big institution and not even realise it,” Mr Kirkland says.

CHOICE has also released a ‘cheat sheet’ that exposes the sub brands associated with big banks. 

cheat sheet of sub brands of big banks 

The reality is, it is not such an easy task to switch banks – especially when you’re paying off a mortgage. Still, if the banks are unwilling to support long-time customers, the only way they’ll ‘get the message’ is for a mass mutiny.

Would you switch banks if they pass on the cost of the levy to you? Do you think the banks have a right to be upset?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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56 Comments

Total Comments: 56
  1. 0
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    Mass mutiny equals jumping out of the frying pan into the fire! The levy will be on banks and institutions.

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      The campaign of ‘not us’ has already begun. Anna Bligh thrust her face in front of the cameras last night and started the ball rolling. Expect a high costing media campaign next. Obvious dear Watson.

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      I’m expecting a high court challenge as it is unconstitutional to levy selected entities like they are doing with the banks.

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      Old Geezer I understood the levy is on the 5 big banks (& sub banks), not all banks & all institutions. How does a mass mutiny equal jumping from the frying pan into fire??

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      Sour grapes. Sounds like you have a lot of your fortune invested in bank shares Geezer.
      The banks will not be successful in trying to use the courts to avoid a levy like this. The courts, which often try to exceed their power and purpose, are not in charge of governing the country. Any attempt to litigate their way out will fail. If they don’t one would have to look if the judge had vested interests in the case.

    • 0
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      No Mick I aint silly enough to have a lot of money in one sector like banks. However I do believe in fairness and this is not fairness and will effect those who can least afford it the most. Little old ladies with a few bob in the bank.

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      Tell it to the CEOs and their Boards who rape the companies they work for Geezer.

    • 0
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      Mick I can see your green eyes of envy.

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      You are mistaking this for my ‘fairness’ bone. You know….what the budget claimed to be all about as it savaged wage and salary earners.

  2. 0
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    Sure the banks are going to pass on this new tax. It is long overdue that governments of both persuasion put an end to the cartel of CEOs and their Boards which extract huge salary increases year in and year out by deceitful means. Perhaps we need a Wealth Tax on earnings so that after a certain limit there cannot be ongoing pay increases which reek of a fixed system.
    Pay for CEOs and Boards is certainly fixed because institutional shareholders are permitted to vote on executive pay and almost NEVER vote against motions for more pay. Why? Simple, because what they have voted for eventually filter through to their own remuneration.
    That is the problem and the reason why I call it a cartel. Governments never fix this and it is an easy thing to fix by disallowing institutional investors (companies investing in other companies) to vote on motions of pay. Instead the leapfrog pay escalation scam is let go and CEOs now earn totally unjustifiable rates of pay.
    If the banks even think about passing the budget hit on then this government should do what it never will, go after the pay packets of highly overpaid CEOS and their Boards. That’ll put the smile on the other side of their faces.

  3. 0
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    When is a liability a liability? If I have a million dollars in a line of credit but don’t use it is it a liability to the bank and does the levy apply?

  4. 0
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    It just shows how much Banks treat us as an unnecessary evil, we just either provide the money for their investment or borrow from them at their terms and conditions. Surely the ACCC or some other independent body should intervene. Perhaps now is the time for a Royal Commission into the Industry. This would keep their Legal Departments busy for 5 years or so.
    Surely the Government has enough legislative wallop to create problems for the banks should they decide to pass this cost on. All they are doing is putting a large target on their backs for all to aim at. Go get them and make them earn their huge profits by hard work not by ripping off those who need to use them – depositors or borrowers. Go get them Malcolm.

    • 0
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      I was surprised that this government went after its base whilst refusing a RC into the banking system. Hard to understand unless this crew is beginning to understand that it will be out at the next election.
      Given the many years banks have attacked their borrowers in frequently unfair manners I look forward to a RC. Just like paedophilia it needs to happen.

  5. 0
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    Regulating banks would put a stop to their greed. Maybe we should follow Iceland’s brave revolt. http://www.bbc.com/news/business-35485876

  6. 0
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    The banks are not surprised by this new levy. Scott Morrison went to London to discuss taxation a couple of months ago. The British Banks pay the same levy, so this is an idea which has come from the UK. Are we to believe that the Australian Banks were unaware of this levy in the UK. The Australian Banks will fight this levy to the death, as they know this is the thin edge of the wedge. In the UK the Levy started at 0.05 and has now risen to 0.17 I believe. The same will happen here. Of course the costs of this tax will be spread over the whole population. What else are the banks to do. If they absorb it they hit only investors in the banks. It’s quite a beautiful ploy by Morrison, Labour has opposed every bill the government has brought forward to reduce the deficit and get the country back on an even keel. If we can’t reduce spending we must pay more in tax. The government will use the banks as a Tax Agent to take the money and pass it on to them in the form of a levy.

  7. 0
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    the big banks are the biggest scammers in the world, and they get away with it, without question, just look how they boast how much profit they make. If the government puts a tax on them, then it is up to then to pay it, even if the ceo excreta have to lose a few million in pay, in fact there should be a Royal commission into the ceo’s pay, even without a tax in question.

  8. 0
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    then the Commission should carry on and inspect the Politicians pay and allowances. that would be worth a vote on, think of the money that could be saved

  9. 0
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    You know you can move your money out of the big 5 banks, refinance your mortgages if you have one (there are no huge penalties in doing that anymore) you can show the banks you have options. Hit the banks where it hurts, don’t take it lying down or just complaining about it. Show them the banks you won’t be exploited hit their bottom line

    • 0
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      Why are you being exploited? Do you really think you would get any better elsewhere? I get much better deals with the big banks than with those smaller ones and they will negotiate. I’d say you are jumping out of the frying pan into the fire.

    • 0
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      Your answer has some merit Old Geezer.

      If people on here are unhappy with possibly being hit with extra fees & charges to cover the imposed tax then for the very small amount of difference in the interest rates moving their money to one of the smaller banks is an option, no good crying about the unfairness of it all if you are not prepared to take action & back yourself.

      At this particular point in time, the banks term deposit rates are virtually non negotiable, correct me if I am wrong though 🙂

    • 0
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      Trees: I did precisely that. Had to leave a few dollars but now with a smaller player…which is also protected if another GFC.
      Also left Energy Australia to help bring down the climate change vandals the coal industry.
      Sometimes you have to act against your own interests to get a fair society.

    • 0
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      Good on you MICK, bloody well done, that’s what I’m talking about, stand by your convictions.

      If you are only concerned about your own welfare & wealth then you are a pretty shallow person. For most of us we can only show our disapproval by marching with our feet, for me it makes me feel effective when I do that.

    • 0
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      I actually campaigned against people with too many assets getting a pension as well. I knew that would come back to bite me but I did it because it was the right thing to do. Now we get nix…but I am not bitching about it.
      Attack me for saying things which are untrue, not for acting on my convictions. That is hard enough as it is but everybody on this website knows what I stand for….and it ain’t corruption and political bastardry.

    • 0
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      Trees everything with banks is negotiable. I have been offered better rates than the norm on term deposits but quite frankly there are better investments elsewhere.

    • 0
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      Mick you get same power whoever you pay for it. That silly campaign by Getup was certainly a big winner for Getup’s pockets. Yes it was a great way for them to convince people and change so that they are making lots of commissions. It really has nothing to do with climate change at all. They did same thing with the banks but there is not one banking institution in Australia that is not is some way exposed to fossil fuels. Yes I went through the list who said they weren’t and not one of them passed.

    • 0
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      Old Geezer you must have many multi millions in the bank if you can negotiate a better rate than the banks are offering, all power to you.

      People that blow their own trumpet all the time are usually fibbers looking for attention. You see I deal with a companies investments & that is multi millions & we cannot knock the interest rate up, I can tell you the owner is a very savvy gentleman but obviously you are way cleverer.

      I think you are missing the point of what MICK was saying. MICK did what he felt was right, have to take your hat off to him. Right or wrong MICK followed through on what he believed in, I respect that.

    • 0
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      No Trees Mick got conned like many others by Getup. Unfortunately many people just take the word of others instead of checking it all out. I’m not clever I just do my homework.

      Years ago we decided to see how gullible people really were. So we decided to ask people to sign a petition to ban dihydrogen monoxide. I couldn’t believe how many signatures we got as people just thought by the name it must be something very toxic indeed.

      Dihydrogen monoxide is the technical name for water.

    • 0
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      You don’t get it still do you Old Geezer – whether MICK was conned or not he did what he believed in for the greater good of our planet.
      That was the whole point of the comments from MICK & myself, about standing up for what you believe.
      I am so glad you put me straight Dihydrogen monoxide cos just the name scares me. I bet you really enjoyed the hoax petition on dihydrogen monoxide, bet you had a good laugh at other peoples expense.
      Glad you are clever, much more cleverer than me, you can deactivate your paywave on your card – still like to know how you did that buddy.
      For those of you who don’t know what I am talking about in this last comment go to the article on smart phones.

    • 0
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      GetUp is not in the business of conning people. That privilege goes to the current government.
      People are indeed gullible. If they were not the coalition would have gotten zero votes after Abbott’s term expired. Nobody in their right mind would have believed the lies first time around but the second….? Tells a story about why the planet is so mismanaged.

    • 0
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      Absolutely right MICK. GetUp is doing a lot of good for all of us bringing different issues to the peoples attention.
      I don’t believe it matters which government is in power they all will always promise things & not delivery, mismanage & do whats best for themselves not the country – so organisations like GetUp make you aware of different issues – it can only be a good thing.

    • 0
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      So Getup is funded out of thin air? Nope it is funded by commissions it receives from gullible people switching to their so called good products. I’ll give them credit though as they do have a good marketing ploy.

      I do get it and Mick probably did it for the right intensions like many others did. But I’m afraid things may not be what they seem and the motivation may lay elsewhere.

      You will find the instructions on YouTube on how to deactivate Paywave. It is actually very frightening when you know how it really works.

  10. 0
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    I can’t understand all this bank bashing and wanting to “hurt” the banks. I would rather live in a country that has successful banks than ones that are going down the gurgler.

    • 0
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      Angelique so would I but the banks are making a hefty profit & they want to pass this new tax onto us than lose any of their profit- is that fair?

    • 0
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      Wanting to hurt the banks? Only bad management and another GFC (coming) will do that.
      The poor banks are doing all right. Just look at what they pay their CEOs and management team……..and you do not even see the other half of their income: partly paid shares, options on shares and gifted shares. So who do you think owns banks? Shareholders?
      FYI I own some bank shares and they do well but that does not mean I approve of how banks operate in this country or the obscene amounts of money theu pay their CEOs and Boards.

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