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Westpac says bank levy will cost it $260m
22 May 2017, 04:01 | Vickie Mathis
Westpac says bank levy will cost $260m
"ASX Release 22 May 2017 IMPACT OF NEW MAJOR BANK TAX ON WESTPAC Westpac today updated the market on the new major bank budget deficit fix levy ('Levy") announced in the 2017 Federal Budget.
On an annualised basis, the 0.06% levy on deposits would cost about A$220 million after tax for CBA, versus A$260 million per year estimated by Westpac, A$245 million by NAB and A$240 million by ANZ, the banks said in separate statements on Monday.
"No company can simply "absorb" a new tax, so consideration is being given to how we will manage this significant impost on the bank", Westpac said.
In a sign they are increasing their political campaigns against the tax, their chairmen also wrote to shareholders criticising the levy and highlighting the potential impact on dividends.
"It places the major banks at a competitive disadvantage relative to worldwide peers and it is a tax on growth because as lending and investment increases the cost of the levy also rises", Westpac says. The two are the first of Australia's largest lenders to give an estimate of the impact of the levy, which the government forecasts will raise A$6.2 billion over the next four years.
Mr Maxsted stressed no decision had been made on what Westpac would do with the levy.
And that means the tax will strip 8 cents a share, or about 4.3% of dividends, based on Westpac's 2016 full year dividends of 188 cents. Now only Westpac, Commonwealth Bank, ANZ Bank, National Australia Bank and Macquarie Group will be targeted by the 0.06 percentage point charge on bank borrowings.
To address the issue, Westpac suggested that a "sunset clause" should be included in the levy.
Prime Minister Malcolm Turnbull said he was confident the new tax, which is created to raise $6.2 billion, would raise that amount.
The government's levy is essentially a quid pro quo in exchange for the liquidity guarantee the Reserve Bank extends to Australia's big banks... Last week, Assistant Treasurer Michael Sukkar did not rule out including foreign banks and Queensland MP Andrew Laming says they should be taxed as well.
Senator Cormann insists there are no major foreign banks in Australia following calls from crossbench senator Nick Xenophon to include them in the policy.
The bank says the exact cost depends on the final form of the legislation passed and the composition of Westpac's liability.
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