Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

You cannot ask a question and then say you do not want to hear the answer. This is what the Investment and Financial Services Association had to say about the 7½ per cent rate:

The decision to lower the withholding tax rate is critical to the maintenance of high levels of long-term, offshore capital flows into Australia. The management of these flows by Australian funds managers will enable additional investment into Australian infrastructure and property assets. The clear message to the world is that the new government is serious in working to enable Australia to continue to develop as a major financial services centre in the region.

Vanguard Investments said:

‘Vanguard is pleased to hear the Treasurer, the Hon. Wayne Swan, has announced a significant phased reduction in the withholding tax rate. This single initiative delivers a vital fillip to Australia’s credentials as a regional investment centre, allowing our local industry to attract greater capital inflows through a sharpened competitive edge,’ said Mr Jeremy Duffield, Managing Director of Vanguard.

AMP Capital said:

AMP Capital Investors Managing Director Stephen Dunne said the Government’s plan to reduce the withholding tax from 30 per cent to 7.5 per cent will enhance the continued growth of the Australian funds management industry.

“Reducing the withholding tax for foreign residents will strengthen Australia’s competitiveness as an international investment centre.”

That is just a sample. The shadow Assistant Treasurer asked the question. Now he has received the answer. He said that nobody from industry had said that 7½ per cent was an appropriate response. He asked for anybody who thinks this was an appropriate response. The shadow Assistant Treasurer asked the question. Now he has received the answer.

The opposition have engaged in a number of other elements in their debate today, which I am more than happy to deal with. Firstly, the shadow Assistant Treasurer said the previous government had a policy of a financial services hub and that we had plagiarised it. But he searched and searched for a policy initiative to back that up. A financial services hub is not a slogan. You need a program. You need a policy; you need more than a slogan. They had a slogan; we actually have a policy and a program. They opposed our proposals to reduce the withholding tax rate against all the evidence that that was an appropriate and necessary policy initiative to promote Australia as a financial services hub. The other thing that the honourable member for Stirling said was, ‘This is all they’ve got: they’re going to reduce the withholding tax rate and that’s it.’ He showed his woeful ignorance of the government’s initiatives. He forgot, chose not to mention or does not know that the government has sent a reference to the Board of Taxation for a managed investments tax regime. That will be one of the most substantial rewrites in Australia’s history of this part of the tax act.

Other countries have developed a specifically designed, fit-for-purpose managed investments tax regime. The previous government failed to do so. We have acted. In the meantime, the Treasury has been consulting with industry on dealing with some of the more anomalous and troublesome elements of division 6C of the act. A discussion paper was issued, and we will be releasing shortly the results of that discussion paper and the government’s proposed policy response. That, again, has been broadly welcomed. The shadow Assistant Treasurer said this would provide not just a tax cut for foreigners but a boost to foreign treasuries. Again, the shadow Assistant Treasurer has shown he is not on top of his brief—unfortunately. The vast majority of people—including the big institutions that we are seeking to gain and the big overseas pension funds—generally speaking do not pay tax in their home institution. Generally, big pension funds do not receive any tax credit for the withholding tax paid from Australia. The shadow Assistant Treasurer is, unfortunately, not on top of his brief. Basic research would have corrected that anomaly in his understanding.

The opposition has, justifiably, raised the question of costings. What it has not outlined is this. Firstly, this is a different measure from what was proposed by the opposition. We are going to 7½ per cent—so, yes, it is more expensive. I do accept that. And I do accept there are other issues. I do accept this is a very difficult area for anybody to cost, as the Treasury itself indicates.

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