SYDNEY (Reuters) - Surprise taxes levied on Australia’s banking sector are frightening off potential foreign investors by creating a less stable business environment, two of the country’s major banks warned.
The statements are the latest salvos in a war of words as the nation’s five biggest lenders hit back against a fresh A$370 million ($280 million) tax announced by the state of South Australia, just one month after being slapped with a A$6.2 billion tax by the federal government.
“Ask global investors about their view of Australia, and most will point to significantly elevated levels of sovereign risk,” Commonwealth Bank of Australia (CBA.AX) Chief Executive Ian Narev said in an opinion piece published late Sunday in the Australian Financial Review newspaper.
“It is in this context that we should view the South Australian government’s unprincipled and reckless tax grab as it walked through the gate the federal government left open.”
His comments were echoed by National Australia Bank (NAB.AX) Chief Executive Andrew Thornton, who has said that London-based investors he had met had less confidence in Australia as a place to invest.
Westpac Banking Corp (WBC.AX) and Australia and New Zealand Banking Group (ANZ.AX) also said last week South Australia’s move could provoke a backlash from banks as they could decide to curtail investment in the state.
The federal government has said its tax was a much-needed revenue-raising measure from profitable banks to plug Australia’s yawning budget deficit. The South Australian government argues its tax would fund job-creation initiatives.
But while the banks have been vocal in their outrage, both levies have broad popular support amid strong anti-bank sentiment following a series of misconduct scandals and years of record profits for the sector.
The state of Western Australia has also said it is also open to the idea of a tax, leading investment house UBS to warn that a “Pandora’s Box” of bank levies was “officially open” in Australia.
The governments of the three most-populous states - New South Wales, Victoria and Queensland - have said they had no plans for a bank tax.
Reporting by Joseph Hinchliffe; Editing by Jane Wardell and Edwina Gibbs