The Finance Minister, according to a New Zealand Herald story, has quietly asked Inland Revenue to look at the appropriateness of the tax settings being applied to banks. Nicola Willis confirmed to the Herald a wide range of options is being considered to ensure the major banks are paying their fair share of tax.
She wants advice back ahead of next year's Budget, which is expected to be delivered just months before the 2026 general election. She said, “our work to enhance banking competition is wide-ranging and as part of this of sought advice on whether the major banks are paying their fair share of tax,”.
I've been interested, she went on, in how New Zealand's bank tax regime compares with Australia and elsewhere, particularly in light of the significant profits Australian banks make from Kiwi customers.
No decisions have been made, recommendations have not yet been taken to Cabinet, so she's not going to comment on specific proposals at this stage.
I would have thought if the company tax rate was a set amount and the banks are paying that, then they're paying their fair share of tax.
I was listening to Heather talking to Claire Matthews, the banking expert from Massey, this morning.
Claire Matthews said the way she thought it might work would be the corporate tax rate would be lowered for all corporates except the major trading banks. Everybody else will be lowered, but banks, so they wouldn't in effect be punished, they just wouldn't benefit from any changes to this tax regime.
But as Claire Matthews pointed out, banks already contribute a significant amount to the New Zealand economy.
They pay a very large portion, something like 20% of total tax, total corporate tax in New Zealand. So they're paying a huge amount of tax, so if you drop the corporate tax rate but keep the bank’s tax at a higher level, you, the Government could manage to avoid the actual impact on their tax take.
I think there's a real danger here. Are they going to suddenly make supermarkets pay more because they, too are Government’s favourite whipping boys and girls? Why are they being singled out?
Sure, I would love it if I didn't have to pay the house price twice over, but I understand that when you're lending money to individuals and to businesses, there is risk involved with that so you have to pay for that risk.
I don't imagine the banks would just close their doors, decamp and head back over the Tasman, there's still money to be made. But I just don't understand why banks would be asked to pay more while the rest of corporate New Zealand pays less.
I don't want a bank to fail. It's not in the country's best interest for a financial institution to go under. We've seen the damage done when the BNZ had to be bailed out, and then the different finance companies were bailed out, why on Earth would we want to see banks fail if they're paying their fair share of tax?
I have no skin in the game other than a hefty mortgage, which I would love to see reduced, but I don't necessarily see it's the bank's fault that they are the ones who profit from lending money.
Kerre McIvor, is a journalist, radio presenter, author and columnist. Currently hosts the Kerre Woodham mornings show on Newstalk ZB - where this article was sourced.
I've been interested, she went on, in how New Zealand's bank tax regime compares with Australia and elsewhere, particularly in light of the significant profits Australian banks make from Kiwi customers.
No decisions have been made, recommendations have not yet been taken to Cabinet, so she's not going to comment on specific proposals at this stage.
I would have thought if the company tax rate was a set amount and the banks are paying that, then they're paying their fair share of tax.
I was listening to Heather talking to Claire Matthews, the banking expert from Massey, this morning.
Claire Matthews said the way she thought it might work would be the corporate tax rate would be lowered for all corporates except the major trading banks. Everybody else will be lowered, but banks, so they wouldn't in effect be punished, they just wouldn't benefit from any changes to this tax regime.
But as Claire Matthews pointed out, banks already contribute a significant amount to the New Zealand economy.
They pay a very large portion, something like 20% of total tax, total corporate tax in New Zealand. So they're paying a huge amount of tax, so if you drop the corporate tax rate but keep the bank’s tax at a higher level, you, the Government could manage to avoid the actual impact on their tax take.
I think there's a real danger here. Are they going to suddenly make supermarkets pay more because they, too are Government’s favourite whipping boys and girls? Why are they being singled out?
Sure, I would love it if I didn't have to pay the house price twice over, but I understand that when you're lending money to individuals and to businesses, there is risk involved with that so you have to pay for that risk.
I don't imagine the banks would just close their doors, decamp and head back over the Tasman, there's still money to be made. But I just don't understand why banks would be asked to pay more while the rest of corporate New Zealand pays less.
I don't want a bank to fail. It's not in the country's best interest for a financial institution to go under. We've seen the damage done when the BNZ had to be bailed out, and then the different finance companies were bailed out, why on Earth would we want to see banks fail if they're paying their fair share of tax?
I have no skin in the game other than a hefty mortgage, which I would love to see reduced, but I don't necessarily see it's the bank's fault that they are the ones who profit from lending money.
Kerre McIvor, is a journalist, radio presenter, author and columnist. Currently hosts the Kerre Woodham mornings show on Newstalk ZB - where this article was sourced.
3 comments:
So this couple of banks pay 20% of company tax. Which also means that our of all the thousands of big and small companies in NZ, this tiny number of companies makes 20% of the total profit. Seems like a rather sizeable slice of the pie.
Do I understand this correctly? A differential corporate tax rating for a particular corporate activity? Sort of mad idea Labour, the Greens and TPM would come up with. Please tell me I've got this wrong.
Do companies pay tax?
Or is it either a cost that the pass on to customers ?
or a withholding tax on dividends in the hands of the shareholders (a lot of people either directly or via say kiwisaver are shareholders of banks)
If there is so much money to be made out of banking in NZ, why are there not more international banks here, surely competition is the best answer to driving down prices (and therefore profits).
Perhaps it is too hard to set up a bank here, or even a branch for existing overseas banks. Or perhaps the customer doesn't see the current prices they are charged as a problem or some of the smaller existing banks would do a lot better if everyone flocked to them.
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