Consider the enormous financial advantages that banks get from their privileged position in our society, advantages that wouldnt even be remotly possible were it not for society and then ask yourself
Why shouldn't banks pay a super profits tax?
What follows is a 2011 article in the SMH
March 5, 2011
Poll: Should the banks pay a super profits tax?
Yes
72%
No
28%
Total votes: 516.
Poll closed 8 Mar, 2011
Disclaimer:
These polls are not scientific and reflect the opinion only of visitors who have chosen to participate.
THE COMMENTATOR: RICHARD DENNISS
Last year Australia's banks made more than $1000 in profit from every man, woman and child in the country. In fact, the underlying profits of the big four banks account for nearly $3 out of every $100 earned in Australia. There can be no doubt that the banks make super profits, and there can be no doubt that we need a banking super profits tax.
But it is not just the size of the bank profits that justifies a special tax: the unique source of their market power must also be considered.
First, in a modern economy it is virtually impossible to avoid bank fees and charges. Centrelink and most employers insist on making electronic payments into bank accounts. While a person who believes restaurants are overpriced can choose to cook at home, customers who believe bank fees are too high can no longer choose to be paid in cash. Not only do the banks have a monopoly over the electronic payments system but we are forced to use that system. Banking has become an essential service and needs to be regulated accordingly.
Second, Australian taxpayers provide explicit guarantees to cover bank deposits. And as we have seen overseas, there is also the implicit guarantee that banks that are ''too big to fail'' will be propped up by governments. It is only fair that if taxpayers face the costs of any catastrophic losses then they should receive a share of the enormous profits.
Finally, the banks have told us again and again that it is pointless to try to regulate their excessive fees and their high interest rate margins. If we try to clamp down in one area, they tell us, they will simply increase their fees and charges somewhere else. If that is indeed the case and we can do nothing to prevent these excess profits, then the least we should do is tax some of the excess profit away.
The banks' final argument is that is what is good for them is good for us. The more profits they make and the higher their share prices the better off we all are, because we all have superannuation. By that argument, the dearer our petrol, the more expensive our groceries and the higher our mobile phone bill, the better off we all are.
Dr Richard Denniss is executive director of the Australia Institute.
THE ACADEMIC: ROSS BUCKLEY
The four biggest US banks represent 34 per cent of their market. The top five French banks represent 50 per cent of that market. Yet our big four account for a staggering 92 per cent of our market.
During the global financial crisis, our big banks acquired St George, BankWest, Aussie Home Loans, Wizard, Challenger Financial, RAMS and many smaller firms.
Financial uncertainty also saw many customers move to a big bank.
This concentration confers two huge benefits on the big banks. The first is the pricing opportunities. Less competition means super profits. Bank profits are almost 3 per cent of GDP. That's right: every time you spend $100 on anything, three dollars end up as profits of a bank.The second benefit is that capital markets know Australia could not now afford to let a big bank fail.
The explicit guarantee introduced in 2008, for which the banks paid a hefty premium, was phased out last year. However, an implicit guarantee remains, and we give it to the banks free. As a result,
Australia's big banks, notwithstanding what they say, enjoy distinctly lower borrowing costs abroad because the Australian government assures their solvency.Just before Christmas the federal government announced that its guarantee of bank deposits was to be permanent, not phased out this year as planned. This was yet another of the free gifts we give our banks.Our tax system is progressive: high earners pay higher taxes. Company tax rates are flat, because companies are more likely to move if taxed heavily.
Yet our banks benefit enormously from being here.
They enjoy an implicit sovereign guarantee of their solvency that is lowering their borrowing costs abroad and yet pay nothing for it. They enjoy a low-competition environment and the resulting massive profits.
Such government largesse is unavailable abroad. France, Germany, Britain and US are all imposing sizeable levies on their banks to ensure the sector can bail itself out come the next crisis, and to discourage overly risky behaviour.
Australia is out of step internationally by giving
our banks such gloriously generous benefits, and not imposing sector-specific taxes in return.
The main argument for an extra tax on mining companies is because of the bounty nature has bestowed on them.
It is time for an extra tax on banks because of the bounty the Australian government, at our expense, is bestowing upon them.Ross Buckley is professor of international finance law at the University of NSW.
Read more: http://www.smh.com.au/federal-politics/political-opinion/should-banks-pay-a-super-profits-tax-20110305-1bih1.html#ixzz3D9gE