Extending the levy on banks could help the government’s difficulties in legislating company tax cuts in light of the banking royal commission, suggests Thomson Reuters.
Bank levy could break tax cut stalemate
Thomson Reuters Australia senior writer Stuart Jones said the government’s plan to gradually reduce the company tax rate from 30 per cent to 25 per cent over 10 years has hit a roadblock, with the banking royal commission hearing allegations of widespread conduct, mistreatment and exploitation.
Mr Jones noted the annual 0.6 per cent levy on Westpac, ANZ, Commonwealth Bank, NAB and Macquarie liabilities was an important part of the federal government’s action on banking reform.
He said the government could increase the bank levy in the upcoming federal budget to offset benefits that the troubled banking sector would receive from company tax cuts.
In addition, Mr Jones said that, while the banks wouldn’t be excluded from the tax cuts, they wouldn’t be ‘rewarded’ either.
“They may look to extend the bank levy to pay for the financial services royal commission,” he said.
“An immediate increase in the bank levy could help the government to decouple the banks from the company tax cuts. It might be enough to soothe the crossbench to get the company tax cuts through.”
When the levy came into effect in July 2017, it was tipped to raise $6.2 billion for the government over four years and was part of plans to return the budget to surplus by 2020-21.
“The government’s already got the bank levy mechanism in place. They could calculate the sorts of benefits that banks will get from the company tax cuts, then put them through on top of the banking levy,” Mr Jones said.
“Then the government can get back to the broader issue of all businesses, and the economy as a whole, benefiting from company tax cuts.”