Major bank levy increase – a new record for tax hike speed?

The major bank levy is increasing after just four days, with today’s additional levy announcement by the South Australian government.

“This must be a new record for the shortest time between a tax being introduced and being increased,” CIS economist Michael Potter said.

The federal Parliament passed the Major Bank Levy Bill on Monday 19 June, and the SA government announced it would add a surcharge to the Levy on Thursday 22 June.

“We were assured the federal bank levy was small and would have a negligible economic impact,” Mr Potter said.

“But the decision by the South Australian government shows this belief to be false. The tax has gone up within a week.

“Who knows where this will end, with the South Australian government reportedly encouraging other State governments to follow their lead.

“The UK’s equivalent levy increased nine times — is that what is going to happen in Australia?

“The bank levy will most likely mean higher mortgage rates. This is effectively another tax on Australian households, who are already being hit by flatlining real wages and ongoing increases in personal tax, mainly due to bracket creep,” Mr Potter said.

The CIS research report, The Major Bank Levy: We’re all going to be hit, released on June 19, examines the significant problems with the bank levy.

The report also critiques the incorrect assertions that the levy will improve bank resilience, help maintain Australia’s credit rating, align Australia with other developed countries, and offset supposedly ‘unfair’ big bank advantages.

Michael Potter is a Research Fellow in the Economics Program at the Centre for Independent Studies and author of the CIS research report The Major Bank Levy: We’re all going to be hit.