16 February 2005

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Experts mull windfall tax on banks
An economist and a banker who preferred not to be named said a so-called ‘windfall’ tax on bank profits should be considered given the high profit margins being achieved at a time when 90 percent of people in Malta are suffering economically.
The Malta Financial and Business Times spoke about HSBC’s recently announced Lm33 million profit to an economist and a prominent banker yesterday, but neither of them wished to be identified.
The high profit, representing a 27 per cent increase on the previous year amounts to more than one third of the price originally paid for Mid Med Bank by HSBC.
At the same time interest being charged by the banks remains relatively high, with the banks paying out very low interest to depositors. Both the banker and the economist felt it was time for the government to consider a windfall tax. The economist was more adamant: “government should consider an oligopoly tax as the banks are in a dominant position and a market cannot work properly with so few players.
The banker told this newspaper the government had two roads to choose from, either to follow the extreme capitalist policy and not interfere, or if it feels there are arguments to take a social stand to consider a windfall tax or take action to change interest rates.
Usually a windfall tax is imposed for one financial year, but the economist suggested that a 50 per cent tax rate for the banks should be considered.
Both were in agreement that with hindsight, the sale of Mid Med Bank to HSBC in 1999 was made for too low a price. “The value of HSBC shares now at more than Lm9 when the share value was a mere Lm2.90 when the bank was sold is a good indication that the bank should never have been let go at that price,” the banker said.
“Over the past five years HSBC has made more profit than the price it paid to buy the entire bank,” the economist told this newspaper.
The banking sphere is not the only market dominated by few players in Malta, but given EU rules on dominant positions both HSBC Malta and BOV could be put in the spotlight because of their market position.

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