The Australian Bankers’ Association (ABA), whose members include the parents of New Zealand's big four banks ANZ, ASB, BNZ and Westpac, has come out strongly opposed to French and German proposals for the introduction of a Financial Transactions Tax labeling it a 'magic pudding tax'.
The ABA says such a tax wasn't appropriate for Australia because its banks didn't fail during the global financial crisis (GFC).
“This is just a tax on the rest of the world to pay for the European Union's debt problems,” ABA chief executive Steven Münchenberg said.
“Nations that are in favour of this type of tax are those where banks had real problems. These countries want to tax their banks because they had to use taxpayer money to bail out the banks during the GFC, unlike Australia, Canada and other countries. ”
A spokesman for the New Zealand Bankers' Association said the NZBA wasn’t able to comment as it hasn’t discussed the concept of a Financial Transactions Tax with members.
However, the Maori Party is in favour of the introduction of such a tax and the Green Party supports a Financial Transactions Tax if all countries were to implement one. The Māori Party's Rāhui Kātene says the European Union is now setting a precedent that New Zealand should follow.
“Money speculators, financial lending institutions, stock market traders and the like are not currently taxed on their transactions in New Zealand," Kātene says. This is unfair as every other sector of the New Zealand economy pays its fair share of tax such as the dairy, manufacturing and service sectors. Why not the finance sector?”
However, Prime Minister John Key, a former currency trader, isn't in favour of such a tax.
Münchenberg said in Australia, where banks have both retail deposit and wholesale government guarantees, taxpayer money wasn't used to bail out Australian banks.
"In fact, Australian taxpayers have already earned A$3 billion from banks for the support given by the Federal Government for the wholesale funding guarantee and will pay more than A$5 billion over its full life,” said Münchenberg.
“This is a 'magic pudding tax' - it somehow raises billions of dollars without anyone supposedly paying much. The reality is that someone does have to pay, either through higher banking costs or through lower returns to superannuation funds and ‘mum and dad’ shareholders. ”
He says there seems to be an underlying assumption in this tax proposal that financial markets are all involved in wild speculation only, rather than the hedging of risk.
"The tax proposal would undermine legitimate attempts to hedge risk and has the potential to disrupt this important insurance, which many companies put in place. This is even more important in these uncertain economic times. The ABA is pleased that previously the Treasurer (Wayne Swan) has ruled out this tax for Australia."
The ABA's comments come ahead of a Tax Forum in Canberra called by the Government this week. Australian Greens leader Bob Brown supports the concept of a financial transactions, or Tobin, tax.