SYDNEY • Macquarie Group, battling a surprise US$4.6 billion (S$6.4 billion) tax on Australia's lenders, has left open the option of moving its headquarters abroad, baffling analysts and lawyers who warned a costly move may do little to avoid the levy.
Australia shocked banks and investors last month with a new balance sheet tax that hits all lenders with more than A$100 billion (S$102 billion) of total liabilities.
The country's top investment bank joined Australia's Big Four lenders in voicing its displeasure with the tax, estimating it would cut its global earnings by 4 per cent and warning of possible unintended consequences for local earnings.
Macquarie has two-thirds of its business and most of its staff outside Australia, but the issue of where its headquarters should be located has not been actively or publicly debated. An unsourced report in the Australian Financial Review yesterday said Macquarie had told at least one of the major political parties it was now canvassing options for relocating outside Australia as a result of the tax.
"Macquarie consistently looks at the most appropriate locations for its businesses and head office," a spokesman for the bank said in response to the report. She added that Australia remained a key market, employing more than 6,000 of the bank's 13,600 staff.
The tax was announced in the May federal budget and is supported by both major political parties. It is expected to cost the sector a combined A$1.5 billion a year or A$6.2 billion over four years in the planned budget. It has no sunset clause.
JUST A SIGNAL
I wouldn't have thought this tax alone would be enough to catalyse (a move) unless they are worried it could go up again in the future... I just suspect they are signalling to the government and letting them know they are not happy and there are things they can do about it.
SHAW AND PARTNERS ANALYST DAVID SPOTSWOOD.
Analysts and investors said Macquarie's decision not to deny a potential move was likely political, but doubted it would move its headquarters over a tax that, at six basis points on certain liabilities, would be minor and which it may not be able to escape in any case.
"I wouldn't have thought this tax alone would be enough to catalyse (a move)," said Shaw and Partners analyst David Spotswood. "I just suspect they are signalling to the government... (that) they are not happy."
Foreign banks like Citigroup and HSBC Holdings would still be subject to the Australian tax if their local liabilities reached A$100 billion, said Australia's Treasury Department.
In warning of potential unintended and disproportionate consequences, Macquarie noted international and wholesale businesses are run through its Australian arm but only one-third of the subsidiary's earnings are generated domestically. It did not elaborate on what those consequences might be.
Moving operations, particularly headquarters, is costly and complex for large institutions.
Rival HSBC last year dropped a proposal to move its headquarters from London to Hong Kong. Analysts had estimated the cost of moving out of London at between US$1.5 billion and US$2.5 billion.
Karara Capital investment manager Rohan Walsh said Macquarie's business had been growing strongly internationally, particularly in the United States and Europe, and it could eventually make sense to move.