OPINION: Picking on banks might be populist, but it is a very risky proposition.
Treasurer Scott Morrison may have found Australia’s leading banks easy pickings for a special new levy, but I am among those who consider this the thin edge of the wedge – taxing success unfairly is wrong.
Banks are important elements of our nation. We need stable financial institutions to thrive (and we certainly have them).
Are our banks expensive? Yes they are, but they don’t have a monopoly, there are other sources of funds for those who need finance. Using banks, paying their fees and making them profitable is the choice made by most Australian consumers.
Adding to the cost of doing business means more people will reconsider the banks as safe havens for their funds, or stable places to get their finance. That will push them towards more risky avenues. Is that a good idea?
And where do those profits go? In the main they go to funds that represent investors such as those with superannuation accounts. A tax on banks is another tax on our savings.
We all know why banks are on the nose.
• They pay their executives more than the rest of us, making us jealous.
• They charge fees for using our money to make more money. We all wish we could do this too.
• They have cut back staff, choosing automation and profits over customer service. So what? All customers have a choice, we don’t have put up with that. In my view, it says more about us than it does about the banks that we put up with it, whingeing instead of moving our business.
• They have ventured beyond their core business and ended up looking incompetent (at best) and shady (at worst) in areas such as financial advice.
These are poor excuses for a new tax. Banks are not tobacco companies, their mistakes are not undermining the long-term health of Australians, financial or otherwise.
Even I will admit the banks could have been better in terms of the way they have developed their businesses. Spreading to financial advice did take them outside their competency.
I would much rather our banks expanded internationally. During the GFC, our banks were among the strongest in the world. That was an expansion opportunity lost.
Admittedly, they have a bad track record overseas. Too many attempts to enter the US, the UK or Asia have failed or been lacklustre.
Perhaps some of those banker salaries would have been more rightly earned if they had have been more successful in creating truly global retail banks overseas.
While the banks’ lack of success in flying the flag for Australian commerce is disappointing, taxing them won’t help.
There is, though, an exception among the five banks chosen so crassly by the federal government. Investment bank Macquarie Group has successfully penetrated global markets and become a hugely successful infrastructure funder around the world.
It has made many of its bankers rich and sent much in the way of profits back to Australia.
Such innovation ought to be lauded, not taxed.
In fact, all the banks are being taxed for the crime of innovating and staying ahead of the pack in order to keep their shareholders happy. Cutting staff, closing branches and putting customers on hold are all things that they had to do in order to be competitive.
Would we prefer they go broke? Would we prefer that foreign banks with the same methods steal their market share?
Perhaps the way consumers cheer on Aldi, a cost-cutting German giant against our home-grown supermarkets, means we prefer foreign corporations to run business in this country.
All companies will be watching their backs now.
Beware of making too much profit, especially if you have customers who can whinge about you and take that to the ballot box.
The irony of taxing success is accentuated by the history of subsidising failure. The Australian car industry was put out of its misery finally after 70 years of taxpayers propping it up.
Having finally realised that it’s dumb to spend money helping a business do something badly, we are now starting to add costs to hinder companies that do well.
This is bad policy and a dangerous precedent.