In last month’s Federal Budget, the Government announced the introduction of an additional tax on the Financial Services Sector, or at least on five of the larger banks operating in the sector. This comes at a time when the Government is on one hand, advocating policies to reduce company tax, while increasing taxes on the other. (So unlike Governments to have contradictory agendas!)
The Liberal coalition Government is ‘banking’ on this new tax levy being more popular than Labor’s failed Mining Tax, which the coalition Government subsequently repealed. This new populist policy is the Government’s attempt to leverage off the creed that all Australians hate banks, apparently because they are well managed global businesses whose apposite profits are too big.
Therefore, the thinking is that the public will be happy if the so-called ‘greedy’ banks are taxed more than other companies and as a consequence, the Government gains a popularity lift from you, the electorate. This is a desperate ‘socialist solution’ by a Government who is supposed to be encouraging private enterprise to grow the economy; no wonder we are confused about what this Government is supposed to stand for!
The Government is taking advantage of the public’s naive ‘bank bashing’ mindset by virtually condoning hatred against a small number of profitable institutions just so they can pass their bias, uncompetitive and oppressive policies unimpeded. The Government is counting on the gullibility of the public who have been conditioned by successive financially incompetent Governments, and the media, to believe we have been ripped off when in fact the Bank’s ‘Return on Equity’ is somewhat moderate compared to many other publicly listed companies (see below).
I keep hearing the media and politicians say that the Banks should pay this new levy and not complain because they (the banks) are so hated and more unpopular than politicians, (if that’s possible). But who are they? Well, ‘they’ is essentially you, whether as an individual shareholder or more likely in your superannuation fund, or if you have a bank mortgage or a bank account, not to mention if you have exposure to any of these banks’ subsidiaries.
Anyone with any relationship, direct or otherwise, with the Banks will pay for this new levy/tax. If there is an additional cost to business, someone pays and in the final analysis, the people who own and deal with the banks will pay the additional tax the Government has conned you into feeling good about.
Let’s face it, I don’t think that getting a dividend yield of 6% as a shareholder of a Bank is an ‘obscene’ return, in fact, far from it given the ‘capital risk’ you carry. So this ‘clever’ new policy is only a slick revenue grab, that somehow ‘the constituency’ has been duped into thinking they’ll love!
If Government-cultivated ‘hatred and loathing’ is driving a prejudicial policy agenda in Australia, where we single out and indiscriminately penalise certain groups or sectors in our community; then we are on a slippery totalitarian slope with despotic overtones.
Another consideration in this subterfuge is the randomness of the policy, there is no reasonable basis for the new tax. Apparently, the Australian Government supports a Fair Taxation System unless the ignorant decide the industry is so unpopular that it justifies a discriminatory socialist policy. If you implement a new tax just because you make a large profit, then why not apply the tax to all companies that make larger ‘returns’ than the Banks do (like miners BHP) and if not, why not? Would that not be a reasonable and equitable basis to apply a tax, with a just ‘outcome’ for all Australians under the ‘Fair Taxation System’?
I have scanned the various market segments and randomly identified 14 companies with a higher ‘Return on Equity’ (RoE) than the five banks targeted. Should companies like those listed below also be identified as ‘bad profitable corporate citizens’ to be singled out and penalised for being commercially viable?
What is going on in Australia when you virtually need to apologise for being successful and profitable? Talk about the tall poppy syndrome; its economic emasculation of epic proportions! If making a profit is so obscene and offensive that we need to disincentivise success, then it is a crippling legacy to pass on to the youth of Australia: a future of limited opportunity courtesy of a pathetic, lazy, short-sighted, spiritless and tired leadership.
Return on Equity:
- Amcor 86.9%
- CSL 41.5%
- JB Hi Fi 37.8%
- Woolworths 32.1%
- Rea Group 28%
- Sirtex Medical 27.7%
- Telstra 26.8%
- McMillan Shakespeare 23%
- ResMed 21.2%
- Breville Group 20.4%
- Flight Centre 20%
- Ainsworth 18.2%
- BHP 16%
- Corporate Travel 16%
- CBA 15.7%
- MQG 14.2%
- WPC 13.2%
- NAB 12.2%
- ANZ 10.1%
3 June 2017
‘He knows nothing; and he thinks he knows everything. That points clearly to a political career’ – George Bernard Shaw.