(Updates with Bankers’ Association comment in fifth paragraph.)
Nov. 23 (Bloomberg) -- The Australian government said it will delay a reduction of the interest withholding tax paid primarily by banks, as it seeks to make savings ahead of releasing its mid-year economic review.
The deferral means that withholding tax paid by foreign bank branches that get funding from overseas head offices, and financial institutions borrowing offshore, will be lowered from 2014-15, a year later than planned, the government said in an e- mailed statement. The measure will save the government A$140 million ($137.5 million) in the two years from 2013-14, according to the statement.
“Fiscal circumstances have changed due to global economic events,” Assistant Treasurer Bill Shorten said in the statement. “We remain committed to implementing this measure from 2014- 15.”
The announcement came as the government secured the backing of the Greens Party and independent lawmakers for a 30 percent tax on coal and iron-ore profits, which was passed by the lower house of parliament early today. The Greens backed the legislation after the government agreed to offset a shortfall in revenue caused by lifting the threshold at which miners will start paying the levy to A$75 million from A$50 million.
The Australian Bankers’ Association said it is “disappointed’ by the deferral.
“If the Government was sincere about competition then it would accelerate this tax measure rather than defer it,” Chief Executive Officer Steven Munchenberg said in an e-mailed statement. “The sooner the playing field is leveled for the foreign banks in Australia, the better it will be for consumers.”
The rate of IWT for foreign bank units that borrow from their head office will fall to 2.5 percent from 5 percent in 2014-15, and to zero in 2015-16, the government said.
The levy for other financial institutions that borrow from foreign financial institutions, and financial institutions that borrow from offshore retail deposits, will fall from to 7.5 percent from 10 percent in 2014-15, and to 5 percent the next year.
--Editors: Edward Johnson, Malcolm Scott.
To contact the editor responsible for this story: Victoria Batchelor at email@example.com