News Analysis: Australian banking giant Westpac hits out at proposed government "bank tax"

Source: Xinhua| 2017-05-22 10:37:34|Editor: xuxin
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By Will Koulouris

SYDNEY, May 22 (Xinhua) -- One of Australia's largest banking institutions, Westpac, has hit out at the Australian government's planned bank levy on Monday, calling it "inefficient."

The new levy to be applied to major banks in Australia was announced during the 2017 Federal Budget earlier in May, and will see the four largest banks in Australia -- the Commonwealth Bank of Australia, National Australia Bank, ANZ, Westpac -- as well as investment bank Macquarie, all having to pay an 0.06 percent tax on their 2.5 trillion Australian dollars (1.86 U.S. trillion dollars) of liabilities.

Westpac released a statement on Monday, saying that the levy as it has currently been proposed is difficult to calculate.

"Based on Westpac's balance sheet, the announced 0.06 percent levy would apply to approximately 615 billion Australian dollars of Westpac's liabilities," the statement said.

"That represents a cost of around 370 million Australian dollars, or around 260 million Australian dollars after tax. The exact cost will depend on the final form of the legislation passed, and the composition of Westpac's liabilities."

The banking giant is adamant that this levy would see them placed at an unfair competitive disadvantage against other international institutions.

One of the main concerns for the banks is that the current levy has no end date.

Michael McCarthy, chief market strategist at CMC Markets told Xinhua: "The great fear here for the banks is that in future budgets it to be a simple thing for whoever is holding the government at the time to ratchet it up."

"So a campaign has to be mounted and that's positive, but I certainly don't think there is any expectation it will be successful in the short term, nor that in speaking up that they have done anything that will damage them."

McCarthy said that the "market accepted the levy is a done deal," but in order to ensure they avoid similar measures in future, they need to establish a firm protest against its operation.

Australian Senator Nick Xenophon also weighed into the debate on Monday and said that he would support the government's proposed bank levy, with the proviso that it is also applied to foreign banks that have a presence in Australia.

"It's important that the foreign-owned banks that have a big presence here in this country also be hit with this levy," Xenophon said.

"That could raise about 750 million to 800 million Australian dollars over the forward estimates, and that itself could fund a last resort compensation scheme for the many tens of thousands of victims of financial mismanagement and fraud in this country."

The independent senator currently holds three crucial seats in the Federal Australian Upper House, with his votes likely being required for the measure to pass when it is tabled and be implemented from July 1, 2017.

Despite Monday's statement, shares in Westpac were higher, and at 1103 AEST, were trading at 31.14 Australian dollars per share, up 0.94 percent.

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