Kerre Woodham: Are the banks paying their fair share of tax?

To start the morning, I wondered about looking at the fairness  - or otherwise - of the corporate tax rate.

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.  

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Carrywood and Mornings podcast from News Talks.

Speaker 2 (00:10):
Headb Start the Morning wondered about looking at the fairness
or otherwise of the corporate tax rate. Waity stuffed for
a Monday morning. I grant you, but we'll tackle the
thorny topics head on. The Finance Minister, according to a
New Zealand Herald story, has quietly asked Inland Revenue to

(00:32):
look at the appropriateness of the tax settings being applied
to banks. Nichola 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 twenty sixth general election.

(00:55):
She said, our work to enhance banking competition as wide ranging,
and as part of this of sort advice on whether
the major banks are paying their fair share of tax.
Willis said, I've been interested. She went on in how
New Zealand's bank tax regime compares with Australia and elsewhere,

(01:16):
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

(01:39):
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 MASSI this morning,
and Claire Matthews said the way she thought it might
work would be the corporate tax rate would be lowered

(02:00):
for all corporates except Hold on a minute, B and
zed ASBA and Z. What do you think you're doing?
Don't you bother stepping forward? No, you stay where you are,
and the corporate tax rate will stay exactly the same
for you. Everybody else will be lowered but you. So
they wouldn't in effect be punished. They just wouldn't benefit

(02:25):
from any changes to this tax regime. But as Claire
Matthews pointed out, banks already contribute a significant amount to
the New Zealand economy.

Speaker 3 (02:34):
They pay a very large portion something like total tax
Caughte 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 banks tax at a
higher level. The government could manage to avoid the excell
impact on their text tape.

Speaker 2 (02:52):
So I think there's a real danger here. Look, why
should banks along with supermarkets? Are they going to suddenly
make supermarkets pay more? Because they too are government's favorite
whipping boys and girls banks and supermarkets, so why are
they being singled out? I mean, sure, I would love

(03:13):
it if I didn't have to pay the house price
twice over, but I understand that when you're lending money
to individuals into businesses, there is risk involved with that,
so you have to pay for that risk. I mean,
I couldn't get the money from anywhere else. I don't
imagine the banks would just close their doors, DeCamp and

(03:35):
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 mean, and also, you know, it's a
bit like, oh, they think they won't come for you,

(03:58):
just wait. You know, if they come for the banks,
then if I was a supermarket owner, I'd be a
bit new us about that too, because you're not flavor
of the month. Again. I can't really understand why, But.

Speaker 1 (04:11):
There we go.

Speaker 2 (04:13):
Who's next? What else don't we like? Who else do
we resent paying because they'll be next to 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 B and Z had

(04:37):
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 mean, my dad was a bank manager, but that
was ten trillion years ago. I have no particular ties
to the banking world. I don't yearn for a particular banker.

(05:00):
I have no skin in the game other than a
hefty mortgage, which I would love to see redre But
I don't necessarily see it's the bank's fault that they
are the ones who profit from lending money.

Speaker 1 (05:14):
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