CANBERRA: Government of Australia proposed to tax bank deposits up to $250,000 at a rate of 0.05% Several months ago.
Their idea was for the money to be invested in a rainy day Financial Stabilization Fund to insure against in the unlikely event of a banking crisis… or all-out collapse.
And as of this morning, it looks like the levy might just pass and become law in Australia. All parties support the idea. Which means that Australia might just have a tax on bank deposits starting January 1, 2016? To be clear, the proposal seems to plan on taxing the banks based on the amount of deposits they’re holding—but it’s pretty obvious this will be passed on to consumers in the form of lower interest rates.
- Taxes on bank deposits are generally the same as negative interest rates. Australia is a rare exception.
Interest rates on bank deposits in most developed nations are practically zero… if not already negative.
So charging a tax above and beyond this would clearly push rates (further) into negative territory.
I have, for example, a small bank account in the United States that pays me about .03% interest (three basis points). If the government imposes a tax of 5bp on interest of 3bp, I’m left with negative interest.
Australia (along with New Zealand) is a rare exception since interest rates are actually positive. You can get 2-3% on a savings account. So a 5bp tax still results in positive interest.