The South Australian Premier, Jay Weatherill, commissioned a discussion paper on the options to address the under taxation of financial services under Australia’s GST.
The paper was released by the Premier with his address to the 2015 AFR Tax Reform Summit today. The AFR reported that:
The change would mean the margin of profit earned by financial institutions on services such as home loans would be taxed at 10 per cent. …
Treasury estimates undertaxation of financial services at $4.7 billion in 2015-16, although these figures are widely acknowledged as being rubbery.
South Australia’s share of the extra revenue would be $332 million, accord- ing to a report commissioned by the state Labor government and written by University of Melbourne senior fellow Michael Evans.
The report recommends a ‘‘supple- mentary’’ tax on margin-based financial services; the difference between what it costs a bank to lend money and what the bank charges its customers, for example.
‘‘In the case of deposit taking and lend- ing, it is the difference between the interest paid and the interest earned over a period,’’ Mr Evans said. ‘‘It would essentially be taxing the profits and wages of the banks.’’
A copy of the report can be found here together with an Appendix.