By Jamie Freed
SYDNEY (Reuters) - Macquarie Group Ltd (AX:MQG), battling a surprise $4.6 billion tax on Australia's lenders, left open the option of moving its headquarters abroad on Friday, baffling analysts and lawyers who warned a costly shift 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 ($74 billion) of total liabilities. It catches Macquarie, the country's top investment bank, in the same net as the country's four largest commercial lenders.
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 said on Friday, however, that 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.
A spokeswoman for the bank said in response to the report: "As we have said over the years, Macquarie consistently looks at the most appropriate locations for its businesses and head office."
"Whilst approximately two-thirds of our business is outside Australia, it remains a key market and is where over 6,000 of our approximately 13,600 staff are employed," she added, giving no further details.
The Big Four banks have been vocal about their opposition to the tax, which 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 ($4.6 billion) over four years in the planned budget. It has no sunset clause.
But Macquarie has not commented publicly on the tax to date, beyond a statement saying it was examining the potential impact.
Analysts and investors said Macquarie's decision not to deny a potential move was likely political, but doubted it would shift 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 catalyze (a move) unless they are worried it could go up again in the future," said Shaw and Partners analyst David Spotswood, who estimates the levy could lower pretax earnings by three percent.
"I just suspect it is signaling to the government and letting them know they are not happy and there are things they can do about it.
Foreign banks like Citigroup Inc (N:C) and HSBC Holdings PLC (L:HSBA) would still be subject to the Australian tax if their local liabilities reached A$100 billion, according to Australia's Treasury Department.
Moving is also complex for large institutions.
Rival HSBC (L:HSBA) last year dropped a proposal to shift its headquarters from London to Hong Kong, its main profit generating hub, after a 10-month review, triggered partly by Britain's tax on banks' global balance sheets that cost HSBC $1.1 billion in 2014. Analysts had estimated the cost of moving out of London at between $1.5 billion and $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.
"Any consideration to move overseas will not be driven by the bank tax," he said. "It will be driven by the business mix."
