The small business community has spoken out against the Rudd government’s proposed levy on bank deposits, saying it will further erode confidence in the federal government.
The new levy comes just weeks after the government announced a crackdown on the way Fringe Benefits Tax is calculated when it comes to salary sacrificing cars, while yesterday the government also confirmed a 12.5% increase for tobacco excise tax despite complaints from retailers.
While the government is framing the levy as money for a new fund that will protect consumers against bank or insurance company failures, the move has frustrated the business community, which has already opposed several new taxes.
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Peter Strong, chief executive of the Council of Small Business of Australia, told SmartCompany this morning small businesses aren’t at risk of paying huge costs – but that the principle of the tax is still wrong.
“The levy isn’t high, but this is not the time to bring in a new tax,” he says. “Can’t we wait until we’re doing better in the economy overall?
“It’s not what we need right now.”
The increased levy on deposits will be confirmed by an Economic Statement this afternoon, although lobby groups have already been informed of the plan – and they’re not happy.
The levy itself is expected to charge a fee for deposits worth up to $250,000, worth five basis points, which the Australian Prudential Regulation Authority will collect. Any amount over $250,000 won’t be charged, but they also won’t receive a government guarantee. The changes are set to start from 2016.
It is expected the new levy will raise about $350 million per year.
The Australian Banking Association has already spoken out, saying it is an unnecessary imposition that will most likely be passed on to consumers.
Federal Treasurer Chris Bowen appeared on Channel Seven this morning to defend the plan, saying the government will “build a fund over time” to protect investors.
“It’ll be run by either the Future Fund or another like organisation, and they will put the money aside. It’ll be quarantined from the rest of the budget and just put aside in case there is ever a need with a bank getting into trouble in Australia – bank, a building society or a credit union.”
The levy comes after Reserve Bank governor Glenn Stevens wrote earlier this year in support of such a scheme, saying the money raised should be put aside in a dedicated fund. He wrote as the head of the Council of Financial Regulators.
But Peter Strong says the problem isn’t the levy itself, but rather “the perception”.
“We had the FBT announcement the other week which we’re struggling with, and this potential levy.”
“It just adds to this whole perception of confidence, and it’s not a good move.”
Businesses recently lamented to SmartCompany the government’s FBT changes would result in redundancies.