On the face of it, opposing the proposed South Australian bank tax – a policy to tax some of our best performing businesses – might sound counter intuitive.
They’re not exactly on every business owners’ Christmas list. They make a lot of money, so why shouldn’t our government hit them up for some much needed revenue that could be used to improve our public services?
That sounds like a sound proposition in many ways but when you delve a little deeper into the details, the reality is that a new bank tax would be an emphatically bad idea for South Australian businesses and for our economy as a whole.
There’s myriad reasons as to why it would not be a smart move if it was introduced but we’ve focused on three in particular.
South Australian bank tax: The effect on investment
First up, investment. The South Australian bank tax would be bad news for investment in this state. Why? Well, let’s imagine this policy is pulled kicking and screaming into law. What will the banks do to offset a new levy on them? Firstly, they could legally lift state-specific interest rates. Secondly, banks WILL pass the charges on to customers and there’s no shortage of ways to do this.
They could simply hike up lending rates, add new charges to product-specific services and even decrease returns for shareholders or to super funds.
There’s a very real possibility that the bank tax could lead to South Australia being the highest taxed state in Australia and at the same time having some of the lowest household incomes.
Bank tax? There’s already a bank tax!
There seems to be so much misinformation about what banks pay in tax. The biggest lie that we see perpetuated is that the proposed South Australian bank tax would be new. Well, here’s the truth. It’s not. Banks in South Australia already pay tax. In fact, they are some of the highest taxed organisations in Australia.
Under the SA government proposal, the five major banks would have to pay a quarterly levy of 0.015 per cent on bonds and deposits over $250,000 — but not on mortgages and ordinary household deposits.
The proposed bank tax would effectively be an extra levy on South Australian banks.
It won’t create jobs and it won’t rake in $370 million
Two of the most regularly wheeled out arguments by supporters of the bank tax is that it will create jobs and help to generate around $370 million in much needed revenue for the state over the next four years.
That sounds fantastic. The problem is, there’s little or no evidence to back the state government’s claims up.
There is, however, plenty of evidence to suggest that it could reduce the state’s job creation abilities. Why? Quite simply, unprofitable businesses don’t create job. If profitable businesses want to invest in Australia, why would they want to do so in a state that’s more expensive for them?
As well as that, the potential for new companies to hire South Australian talent would be hit because it’s probable that startup businesses would be far less likely to secure business lending in a state where banks are taxed more. It’s a case of managing risk for them.
The South Australian bank tax won’t just be bad for businesses. It spells bad news for everyone in the state. It’s time our government binned it and spent its time focusing on policies that can help lift our deplorable unemployment rates. Raising and creating new taxes won’t do that.
Andrew Mattner is a director at Altitude Advisory, a South Australian business consultancy and tax specialist with offices in Adelaide and throughout the state.