COBA calls for D-SIB levy in Federal Budget
COBA is calling for a levy on Australia’s four “domestic systemically important banks” (D-SIBs) as part of a package of fiscally responsible budget measures that will deliver ongoing savings to the Federal Government of more than $1.4 billion a year.
The recommendation is one of three made by COBA in its 2014-15 pre-budget submission. COBA also recommends:
- Fairer taxation of interest earned by Australian depositors; and
- A modest government contribution to the costs of regulator APRA to promote efficiency.
COBA CEO Louise Petschler said these measures would reduce risk in the financial system and promote banking competition.
“Applying a levy to systemically important banks will support financial system stability,” Ms Petschler said.
“It will recognise the financial benefit the big four receive from their ‘too big to fail’ implicit government guarantee.
“Our levy proposal is consistent with the International Monetary Fund’s observation that Australia’s ‘four major banks enjoy a funding cost advantage derived from an implicit government guarantee, and should bear some of the cost of mitigating systemic risk.’
“Our submission also backs a capped 50% discount on tax paid on deposits, which are the safest and simplest savings product, yet bear the heaviest tax burden.
“In the current low interest rate environment, with the cash rate below the inflation rate, real interest rates are negative, meaning it is difficult for depositors to maintain the real value of their cash holdings in pre-tax terms, let along once tax is taken into account.
“Fairer tax for deposits has additional benefits, including providing a larger pool of stable funding for the banking system and promoting competition in banking,” Petschler said.
For more information please contact:
Daniel McDougall, Senior Manager – Media and Communication
02 8035 8444 or 0407 637 541, [email protected]