AUSTRALIA’S banks are to stop using a technique which has been blamed for the biggest run on their books in two decades, as a report found they had been using the practice to skirt the law.
A report by the Senate committee on banking said the practice was “a classic use of the accounting method of ‘revenue stripping’ which allows banks to skirt financial reporting requirements and to avoid being required to disclose the amount of their net assets”.
The practice of “revenue striping” was first exposed in the mid-1990s, when the Bank of England introduced its “fiscal compact” which required banks to report the value of assets on their balance sheets.
The Senate report said the bank used “re-inforced and highly inflated” assumptions to make those assumptions, which led to the bank failing to provide the correct amount of money to the Government’s debt repayment scheme.
In some cases, it was also “not possible to prove the amount” of the funds were stolen and the “revenues were stripped by at least one bank”.
It also found that in the first three years of the financial crisis, the amount owed to the government by a number of Australian banks, including Commonwealth Bank, Bank of New South Wales and ANZ, totalled $3.7 billion, which was “much more than was available in the Australian economy”.
“These figures are likely to have been understated, since the Treasury did not publish the figures,” the report said.
It said the “fear of being sanctioned by the Australian Government” made banks reluctant to share the information.
“In this environment, the ability of banks to avoid reporting the true amount of assets held by them was reduced, with a significant number of banks reporting assets of $1.8 billion or less.”
The Government’s report said that in 2013-14, $1 billion of the $3 billion of debt owed to it by banks was “in excess of the amount the Government has earmarked to repay it”.
Senator Sam Dastyari, the chairman of the committee, said the committee was calling on the Government to immediately suspend the use of revenue stripping by Australian banks and to introduce “the appropriate controls”.
A spokeswoman for the Australian Banking Association said the association was “concerned” about the report and would take the report “very seriously”.
She said the ACCA “had been working to ensure compliance with the financial reporting laws for the past 15 years” and “had no further comment”.
Topics:financial-services,finance,consumer-finance—financial-instutions,financial-markets,industry,bankers,government-and-politics,business-economics-and.finance-and/or-fraud,government,government—state-issues,banker-and-$1-200,act,australia,aurelia-south-east,sutherland-3830,canberra-2600,arthur-lake-3815,lincoln-3835,parliament-house-2660,brisbane-4000,vic,aurna-4830,vic—south-west-2121,vic—-south-western-2422,aotearoa-4800,warwick-4600,ayr-4870,nsw,aestherbury-4880,fiji,brisbane-6000,port-macquarie-4700,vic-8330,portland-3300,sydney-2000,sunday-harbour-2800,london-3000,victitle AUSTRAILONIA’D BANKS TO STOP TAXING ‘LAPIDUS’ OF FUNDS FROM CLIENT article Banks are to start stopping using a “lapid” of funds that is designed to help avoid paying income tax on money that flows from customers to the banks, the Australian Financial Council (AFCC) said on Tuesday.
Lapidus is a technique that allows a bank to reduce its exposure to income tax by paying interest on money borrowed from clients.
But the Federal Court has ruled that the practice is “illegal”.
If you’re thinking of paying income taxes on the money you send your bank to you’re entitled to a rebate of up to 25 per cent of your income.
If the amount you send to your bank is less than the tax rebate, you have to pay tax.
And that’s because the “lapis” technique does not apply if the money is from a non-resident, and there’s no exemption for the “lapti” technique.
Under the federal banking code, the Government can impose a maximum of $2.3 million in “unrestricted” penalties on a bank if it fails to pay income