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The Federal Government's controversial levy on the big banks has passed both houses of Parliament.
When asked about the bank levy on May 21, Senator Pauline Hanson called it "policy on the run" that was not "well thought out".
In support of this, Senator Hanson claimed: "Being a bank levy, it is a tax deduction to the banks — if it was a tax it would not be a tax deduction."
Is the levy tax deductible? Does it matter whether it is a bank levy or a bank tax? And is this evidence of policy on the run?
RMIT ABC Fact Check investigates.
The verdict
Senator Hanson's statement is flawed.
The major bank levy is tax deductible: the banks will be able to claim the amount of bank levy paid as a business expense, which will reduce the amount of corporate tax they have to pay on their profits.
But this is a normal part of the taxation system.
It has nothing to do with whether it is a "bank levy" or a "bank tax".
And the tax deductibility of the levy does not in itself support the view that the levy is policy on the run or poorly thought out.
What is the bank levy, again?
The bank levy was unexpectedly announced in the 2017-18 budget on May 9.
Details of the levy were only made public some 25 days later, when the Government released the legislation: the Major Bank Levy Bill 2017 and the Treasury Laws Amendments (Major Bank Levy) Bill 2017.
The "major bank levy":
- Begins on July 1, 2017
- Will be payable quarterly by "authorised deposit-taking institutions" with total liabilities greater than $100 billion
- Is calculated as 0.015 per cent per quarter on certain liabilities
The Government estimates the levy will bring it an extra $1.6 billion in 2017-18, $1.5 billion in each of the following two financial years and then $1.6 billion in 2020-21.
Is the levy tax deductible?
When Ms Hanson made her statement, there had been confusion over whether the levy was tax deductible.
The following day, Opposition Leader Bill Shorten and Labor's treasury spokesman Chris Bowen asked several questions on that point in Question Time in the House of Representatives.
In answering the questions, both the Prime Minister Malcolm Turnbull and Treasurer Scott Morrison confirmed the levy would be tax deductible.
"It is deductible as a business expense," Mr Morrison said.
The Government says the reduction in estimated revenue between 2017-18 and the subsequent two years is because of the interaction between different taxes.
Mr Turnbull told the Parliament on May 22, 2017:
So, Senator Hanson is correct when she says the levy "is a tax deduction" for banks.
Does it matter what it is called?
Senator Hanson is on shakier ground when she introduces a difference between a "tax" and a "levy".
Experts tell Fact Check that the word you use to describe a tax does not change its tax deductibility status.
Economist Saul Eslake tells Fact Check that "Ms Hanson is wrong in saying that if it was a tax, it wouldn't be a tax deduction". Mr Easlake points to payroll tax and Goods and Services Tax paid by banks, both of which are called a "tax" and are tax deductible.
RMIT senior lecturer in taxation Dr Venkat Narayanan says:
Similarly, Muhunthan Kanagaratnam, a tax specialist at law firm Gilbert + Tobin, tells Fact Check:
Senator Hanson is wrong when she claims that if the levy "was a tax it would not be a tax deduction".
Does a tax deductible levy suggest policy on the run?
Fact Check asked Senator Hanson's office for an explanation for her statement, but no response was received.
Senator Hanson linked the tax deductible status of the levy with "policy on the run" that was not "well thought out".
However, a look at tax law indicates that it is in fact normal for these types of taxes and levies to be tax deductible — it would be more unusual to deny the deduction.
RMIT's Dr Narayanan says: "As a general rule, a business entity can claim a deduction for any business expenses, including taxes other than income tax."
There have been cases where the law prevents deductions for certain expenses, but Dr Narayanan tells Fact Check that this is normally for "socially undesirable" expenses such as a bribe to an official.
Similarly, Mr Kanagaratnam says: