The new levy on selected liabilities — mainly borrowings and non-guaranteed deposits — of selected banks (the big four and Macquarie) is an unexpected tax grab of at least $1.5 billion a year. The levy encapsulates the twin themes of the budget: hunger for more revenue and a craven appeal to populism.
The government’s minimal effort to justify the levy is out of proportion to its significance. We are told simply that it “represents a fair additional contribution from our major banks and will assist with budget repair.” Fairness, as usual, is what the government says it is.
This is a serious new tax that has not gone through the public exposure and consultation processes that such a proposal would normally warrant. It has never been proposed by any review of the Australian tax and banking systems. It has come out of the blue.
It is an illustration of populism in that it panders to the public’s dislike of banks. As an example of the hunger for revenue, the levy joins other new taxes as opportunistic appeals to populist sentiment: one on foreigner-owned residential properties deemed by the government to be ‘vacant’ for more than six months of the year; and on employers bringing in workers from overseas.
On a much larger scale, the new taxes join increases in existing taxes, such as a proposed 25% increase in the Medicare levy in 2019 yielding an extra $4 billion a year.
These new and increased taxes will add more than $7 billion to tax revenue by 2020-21 on top of automatic growth in revenue from economic growth and inflation. All up, and if the underlying assumptions of the budget are to be believed, tax revenue will grow by 31% in the next four years and as a share of GDP come close to the record levels seen in the resources boom fuelled budgets of 2003–2008.
Revenue — not greater expenditure discipline — is the government’s chosen pathway to a balanced budget, and it is not shy about appealing to populist sentiment to get its way.