Monday, 19 June 2017
Major Bank Levy Bill 2017, Treasury Laws Amendment (Major Bank Levy) Bill 2017; Second Reading
I will be supporting the Major Bank Levy Bill. But, having said that, there are some issues relating to the bill which I do not like. I despair as a Liberal that we are taxing different companies differently. I think taxation should be even across the board. Carving out five or six particular companies for an additional levy seems to me to be not appropriate. I am not going to go into that. Those with much more learning than I have would give you a wonderful treatise on why that is not appropriate, suffice to say that I am uncomfortable with that, and I know that many in my party are.
It also gives a sort of go-ahead for other governments, not our government, to introduce things like a super profits tax—picking on certain companies and picking on certain individuals and not others—and that concerns me. While we have a Liberal government, I am relatively satisfied that that will never happen. But there will not always be Liberal governments, and I am concerned that, when that does happen with other governments, it will make it rather hypocritical for us to say, 'You can't do that.' So that is a political reason. I have mentioned the policy reason ever so briefly, and, as I said, others could expand on that more eloquently. That is not the purpose of my being here today.
In spite of those misgivings, I am persuaded that we do need to repair the budget, and I think the purpose for which the levy was introduced is a valid one. If we can do anything to repair the budget mess left to us by the Rudd-Gillard government then we should look at it, even though it is done in a way which, as I said, I and many other Liberals do not really like. But the idea of using this additional money to bring the budget back into surplus to repair Labor's mishmash of the country's finances is probably balancing more towards me supporting this than against my natural concern about it. Also, there is the argument that this is—put in another way—a payment for the licence which Australian taxpayers give the major banks by way of a permanent guarantee in times of difficulty. Certainly at the time of the global financial crisis it was the taxpayer-backed guarantee that the Australian government was able to give the Australian banks that kept us relatively free from any major catastrophe. The argument is that this is some recompense by the banks for Australian taxpayers against that guarantee that certainly protected Australian banks at that time.
Before I go on to the main purpose of my speech today, I indicate that, again, there has been a bit of talk about royal commissions. I do not think they achieve anything. They get a lot of headlines and a lot of good, easy stories for the media but, regrettably, they achieve very little. I also make the point, in responding to some of the previous speakers, that profit is not a dirty word. The fact that banks make money, and make it out of me as a borrower, is the way that the world goes around. That is commercial activity; that is business activity. Good luck to them if they make big profits if they run their businesses well. As a customer of a bank, I have alternatives that are always open to me.
I also remind senators who are howling loudly about the profits that banks make that, of course, those profits go to shareholders. Many shareholders are mums and dads around Australia that we all know, and perhaps the greater number of shareholders are superannuation funds that invest in major corporations. Shareholders expect banks to make profits—the bigger the profit, the bigger the shareholding revenue and dividends to shareholders. That means that superannuation funds, which we all subscribe to, are investing in businesses that are making money and making good profits. That is what we all want as potential superannuation recipients in the years to come. When senators get up and rubbish the banks for the profits they make, they should remember that a lot of those profits go back into the superannuation funds that are trying to make the nest eggs of every retiree even better. Many people in their later years of life have direct shares in the banks and they look forward to the banks making the best possible profits. I mention these couple of things in passing.
I wanted to participate in this debate—and I will briefly take part in the committee stage later on—because of some of the recommendations of the Senate Economics Legislation Committee, of which I am a member. Last Friday, the committee heard from all the relevant interested parties that we could fit in. The committee, which has a government majority, made five recommendations. I am yet to hear whether the government has adopted those recommendations. A journalist rang me not long before the dinner break and said he had heard the government was not going to make any amendments to this bill, which to a degree does distress me. Unfortunately, Senator Cormann is not here, although I appreciate that Senator Fierravanti-Wells, who is the minister at the table, will no doubt pass this on.
I find it incredible that the government would not support the committee's unanimous recommendation 4. I repeat: this is a committee with a government majority and two Labor senators as well, and all agreed with the five recommendations that have been made. Recommendation 4 says that the legislation should be amended so that the Treasurer may, on the advice of APRA, suspend the application of the levy to any or all deposit-taking institution—the banks—in extreme financial or economic circumstances. Hopefully, there will never be extreme financial or economic circumstances that might make it necessary to refer to this particular brute provision, but it was raised by witnesses at the hearings. The committee, in its wisdom, thought that this was probably an amendment that the government could easily introduce; it would give the Treasurer some discretion to remove the levy in some extreme financial or economic circumstance. It would cost the government nothing, but give the Treasurer that additional flexibility which may be needed should those circumstances ever arise. As I said, I hope those circumstances never will arise, but if they did it would give the Treasurer that power. I think he would have thought that was a very reasonable recommendation that the government would have grabbed with both hands and taken on board. In the committee stage I will be asking whether the government intends to adopt that—and, if not, why not.
All of the recommendations were thought through carefully by the committee. The committee did not make the recommendations just for fun; they made them because they thought they would improve the bill. The final recommendation of the bill says that 'subject to consideration of the other recommendations, the committee recommends that the bills be passed'. So the committee adopts the bills and says they are appropriate for all the reasons mentioned in the committee report and in the second reading speech. I would hope the government will seriously consider them.
Recommendation 1 says:
The committee recommends a review be conducted by the Senate Economics Legislation Committee—
the same committee that has made these recommendations—
in a minimum of two years.
So in two years time the same committee would have a look at that bill to determine, as stated in the recommendation, the efficacy of the policy in fulfilling its stated objectives—that is, is this levy actually going to repair the budget? Because that is what it is all about; it is not just another tax; it is there specifically to repair the budget. So the committee thought it might be a good idea for someone to have a look in two years to see if it was actually going towards doing that. We could have recommended that some independent authority or some other organisation might have a look at it; but we thought it was probably safer to send it back to this committee, so ably chaired by Senator Hume, to see if it was fulfilling that obligation. The committee recommended that, in that two-year review, the committee would also have a look at the effect on competition in the Australian banking market. So there was a lot of evidence given about why this did not apply to international banks, why it did not apply to what I would call the smaller banks. There were reasons for that, which were explained by the department and others. Whether the submissions made to the committee were valid or not, it is something the committee thought we should look at again after the scheme had been in operation for two years.
The third dot point in the recommendation was about whether the levy is required in perpetuity, which it currently is; this legislation puts the levy there in perpetuity. The recommendation was that the committee should review whether the levy is required in perpetuity, including the need for a further review at that time that the stated objective of the levy is achieved—that is, when the budget has been repaired.
For the reasons I mentioned earlier, I am a bit uncomfortable with the idea of the bill, but if it is all about repairing the budget then I will go along with it. But once the budget is repaired one would think: if the principal underlying reason was to repair the budget and then it achieved that goal in four or five years time, why do you keep the levy going? What was urged upon the committee by several of the witnesses was that there should be a sunset clause that would say that, once the budget is repaired, the legislation stops. But the committee thought a better way to approach it would be to have a review, see where that is going, see whether the levy was repairing the budget and then, if it was, look at whether this additional levy would stop once the budget was repaired. I thought that was a fairly reasonable recommendation of the government. It does not really cost the government anything except having a committee meet in two years time to have a look at those issues and to see whether in two years time the committee thinks the levy works properly, is doing what it was set to do and it was necessary to continue it without any time limit. I would certainly hope that the government might seriously look at that and I would be interested to hear the minister who is taking this bill through actually comment upon that in the committee stage.
The committee also recommended in recommendation 2 that the Treasury should closely examine issues relating to the technical aspects of the bill to determine if changes are required to avoid double taxation and/or to narrow the liability base. There was some evidence given to the committee—I suspect most other committee members understood that a lot better than I—but, whilst we could not agree that there were technical aspects of double taxation issues that needed to be addressed, the evidence given to us suggested that there was the possibility that in some cases there might be that sort of taxation. Accordingly, the committee, without being definitive on that, did ask the government to perhaps look at that. I hope that, when the minister responds at the end of this debate or in the committee, he can indicate whether those concerns about double taxation were in fact real or otherwise.
The committee also recommended in recommendation 3 that Treasury provide a greater explanation of the rationale for the method of liability calculation, which presently excludes foreign banks and specifically provides an explanation as to why Macquarie Bank is subject to the levy while foreign based competitors are not. Again, evidence was given to the committee by, obviously, Macquarie Bank and by the Bankers Association and all the individual major banks, who urged the committee to apply the same levy to foreign banks who do collect deposits in Australia. The suggestion was that they should be levied not on their deposits outside Australia but on their deposits inside Australia. There were reasons given by the department and others as to why that was not appropriate and not in the best interests of the goal being sought by this particular piece of legislation. But the committee thought that it would be useful for the Treasurer to provide a better explanation around those issues.
I will leave my contribution there, but I am asking the minister to indicate why recommendation 4, which clearly cost the government nothing and which gives the Treasurer a little bit of extra flexibility, in the hopefully unlikely event of an extreme financial or economic circumstance arising—I hope that the government would adopt that, and I would be very keen to hear why the government would be opposed to recommendation 1, which was the one about having a review in two years. So while I support the bill for the reasons I have mentioned, I also think that these recommendations are appropriate and should be considered by the government, and I will be interested to hear the minister's response.