Prime minister Kevin Rudd government will implement a tax levy on all depositors account on banks, mutual banks and credit union to boost bottom budget line, giving the budget a boost of $733 million.
Taken from CourierMail:
Rudd Government to whack 0.05 per cent levy on bank accounts to take $733 million for Budget
BANK customers will be forced to help prop up the Rudd Government’s budget with a new levy that will slice a combined $733 million from interest payments.
In a brave move just before calling an election, Prime Minister Kevin Rudd will whack a 0.05 per cent levy on all bank, mutual bank and credit union accounts up to $250,000 to help boost his own Budget bottom line.
Under plans to be revealed today, the Government will defend the move as a form of insurance for guaranteeing bank deposits and claim most people will not notice the difference.
But even rumours of the move sent jitters through the share market.
Almost $4.5 billion was wiped off bank stocks on Thursday after investors were spooked by speculation about the new tax.
If the banks pass on the costs to customers, those with a bank deposit of $10,000 would see about 50 cents wiped off their monthly interest payments.
This amount would rise to $12.50 a month – or $150 a year – for individuals and businesses with the largest deposits affected.
Despite promises not to change rules for superannuation, Government sources confirmed self-managed super funds would be hit with the new tax for any cash holdings.
Treasurer Chris Bowen said the Government “have no plans to tax banks”, but he said he was consulting with banks about financial “regulation”.
He will reveal the details of the new levy in a mini-Budget on Friday, where the Government will spell out how it will pay for a multi-billion dollar collapse in tax revenue and its expensive plans to send asylum seekers to Papua New Guinea.
The money raised from the savings levy will go into a quarantined “financial stability fund” that the Government can use to pay out deposits if a bank fails.
But the amount in the fund will count against the Government’s Budget bottom line and help it scrape back into surplus by 2016-17.
The Government currently guarantees deposits up to $250,000 but it does not impose any charge on financial institutions for doing this.
However, if a bank collapsed now, the Government would be forced to cover the costs by raising taxes or borrowing the money.
The new tax will kick in on January 1, 2016, and is expected to accrue $733 million in just 18 months.
Australian Bankers’ Association chief executive Steven Munchenberg warned savers would end up paying the “unnecessary” impost.
“We don’t support it and don’t think it is valid and it is ultimately likely to be passed on to customers,” Mr Munchenberg said after meeting with Mr Bowen yesterday.
Australia is one of only a few developed countries that does not have a so-called “deposit insurance scheme”.
Similar schemes exist in the USA, Canada, Germany, France, Hong Kong, Singapore and Japan.
In a review of the Australian banking sector in 2012, the International Monetary Fund proposed Australia create a fund to guard against future financial turmoil.
Reserve Bank of Australia governor Glenn Stevens wrote to former Treasurer Wayne Swan in March this year calling for a similar bank levy.
In the letter, Mr Stevens said the move would mean banks were “paying for the benefits they receive from Government financial guarantees”.
Mr Swan did not include the measure in the Budget in May.
But Mr Bowen said there was currently “a gap in Australia’s public policy when it comes to provisioning for any potential bank or deposit-taking institution failure.”
Opposition Leader Tony Abbott took a swipe at Labor’s planned tax hikes but did not rule out keeping the measures if he wins the election.
“This is a government that cannot control its spending and because it can’t control its spending whenever it gets into trouble, it hits you the Australian people with more taxes and all of it, whether it’s a bank deposit tax, an increase in cigarette tax, it’s a tax on you the people,” Mr Abbott said.
“If they do this to you before the election, just think how bad it will be after the election.”