CANBERRA: Depositors certainly get a benefit from the federal government’s Financial Claims Scheme, which protects them from a bank collapse by guaranteeing up to $250,000 per account holder per bank. But given the lack of bank failures in Australia, it’s not a guarantee depositors will be that keen to pay for. And while the amount is small – just 0.05 of a percentage point on the amount of money sitting in a deposit – they might begrudge the $500 million the levy is likely to raise each year going straight into the government’s coffers.
The banks have previously argued for an “ex post” funding scheme; a levy should only be imposed on the banks if a bank actually fails and there are insufficient funds recovered through the liquidation to recoup any government bailout costs. It shouldn’t be like paying an upfront premium on insurance, they say, especially given how unlikely it is that a bank will crash in Australia.
David Murray, who has just completed a comprehensive review of the financial system that was critical of the banks in various areas, backed their thinking. Mr Murray said the funding model preferred by the banks “avoids placing an ongoing financial burden on the industry” by minimising ongoing regulatory costs.
Putting the philosophical debate aside, what is certain is that charging an upfront levy on everyone will provide revenue for a cash-strapped government. And it seems that it will be depositors that will ultimately pay; the banks say they are likely to pass the impost straight through to customers.
It remains to be seen if the government’s tax white paper, to be unveiled on Monday, will effectively tackle how current taxation policy settings are increasing systemic risk in the Australian financial system. But a tax on deposits, without changing taxes for other assets, is heading in the opposite direction from more stability.
