SA banks pleased global tax is axed

Bankers and tax experts in SA said yesterday common sense had prevailed when the Group of 20 (G20) countries agreed a global bank tax was not a good idea.

They said they should not be made to pay for the sins of their more adventurous counterparts in the US and Europe that largely led to last year’s financial crisis.

Rather than imposing a tax that would unfairly punish countries whose banks did not need to be rescued with public funds, they said proponents of the tax should instead focus on cleaning up the mess caused by their own financial services sector.


“It is a very sensible decision not to impose a new global tax to fund future bail-outs (because) it would make no sense for South African taxpayers to bail out Greek banks (for example),” said FNB CEO Michael Jordaan.

At the weekend G20 finance ministers and central bank heads failed to agree on the tax, the main purpose of which was to shoulder the cost of future bail-outs.

They watered down the proposal by suggesting a common set of guidelines to deal with distressed financial institutions.

Standard Bank SA CEO Sim Tshabalala said the tax should not have been pursued, while Peter Dachs, director in the tax department of law firm ENS, accused developed countries of wanting to “have their cake and eat it” by attempting to ask the world to shoulder the indiscipline of their financial services sector.

Yesterday, the Organisation for Economic Co-operation and Development (OECD) said European banks should increase the quality of their capital to better prepare for possible “accidents” in financial markets.

“Good, stable, well-regulated systems do have a majority of deposits and loans,” OECD secretary-general Angel Gurria said at a conference in Montreal.

The Basel Committee on Banking Supervision, which sets minimum standards for banks in 27 countries and territories, proposed new rules in December, including that lenders increase the amount and quality of capital, boost liquidity and adhere to stricter leverage ratios. Banks in SA and countries such as Canada, China and Brazil, whose economies suffered less or were spared the pain of last year’s crisis, would now not need to impose the tax, even though some European governments are still insisting on some form of a levy.

“Moreover, such a global tax to fund bank rescues would have given the impression that failing banks would always be supported, which could have resulted in yet more risky behaviour,” Jordaan said.

Tshabalala was scathing of the G20 for even considering such a tax, saying he did not think it was right for banks in developing countries to shoulder the “wrongs” committed by banks primarily in the US and Europe.

“This would have been more akin to the developed world passing on the costs to the developing world, and would not help the developing countries to close the inequality gap with developed countries,” he said. “The impact, had this tax been implemented, would likely be to reduce banks’ ability and willingness to lend, which could hamper the speed of economic recovery.”

Tshabalala said the tax would have increased funding costs, particularly at a time when SA was embarking on huge infrastructure spending.

A banking and capital markets director at Ernst & Young, Emilio Pera, said such a tax would have affected the recovery of some sectors in SA. “I believe a one-size- fits-all solution could hamper the recovery of the sector in some countries, for example, SA, where banks were not as severely affected,” he said.

Nazrien Kader, of Deloitte’s financial services taxation unit, warned that UK plans to reform its banking system could affect local banks, particularly on perceived excessive bonuses. “South African banks should (note) that the UK has promised robust action to deal with unacceptable bonuses in the financial services sector (and) not just banks where the South African regulators have generally confined their scrutiny,” she said.

Source: Business Day