Australia airs plan to tax big bank deposits

AFP-JIJI

Australia reportedly plans to slap a levy on bank deposits to help boost its coffers, with the money raised used to protect savings against a bank collapse, it was learned Friday.

The development sparked criticism from the banking industry after it was widely reported that a 0.05 percent tax on deposits up to $250,000 Australian dollars ($223,255) will be collected from 2016, raising a forecast Aus$733 million in its first 18 months.

The controversial move will be part of Treasurer Chris Bowen’s economic statement, which was due to be released Friday ahead of national elections that Prime Kevin Rudd could call as soon as this weekend.

Rumors of the move sent bank stocks tumbling late Thursday although they recovered some ground in morning trade.

Bowen told Channel Seven television the money raised will go into a new Financial Stability Fund, but will be counted as revenue in the budget.

“It’ll be quarantined from the rest of the budget and just put aside in case there’s ever a need with a bank getting into trouble in Australia,” he said. “It hasn’t happened in Australia for quite a while, but we can’t be complacent.”

He said the levy had been recommended by the Reserve Bank of Australia, the International Monetary Fund and the Australian Prudential Regulation Authority, but the industry said it was not necessary.

Australian Bankers Association chief Steven Munchenberg said Australians’ savings were already well protected by the country’s robust and secure banking system.

“This is simply a cost on Australians that is not really going to deliver any benefits in terms of what is already a very stable and safe system,” he said, and indicated the extra costs borne by banks would most likely be passed onto customers.

Canberra is trying to plug an estimated Aus$18 billion deficit forecast for this financial year and return the budget to surplus in 2016-17.