Tax reform needed to attract Asian investors

Asia is a big potential market for Australian banks but the Government needs to remove the withholding tax on interest earned from Australian bank accounts held by non-residents before that potential can be realised.

Standard Chartered Private global chief executive, Peter Flavel, said Australian banks were pursuing growth in Asia by acquiring businesses in the region and opening branches.

Speaking at yesterday's Australian Private Banking Conference in Sydney, Flavel said it made sense for the Australian banks to follow the regional trade routes into Asia but they should also be looking at the way Swiss banks do business offshore, booking money offshore and in their home market.

Flavel said: "Why not let Hong Kong or Singapore investors have their Australian dollar deposits in Australia? The Government would have to remove the withholding tax but it would open up exposure to a retail investment market in Singapore alone that is as big as the Australian superannuation market."

Non-residents must have 10 per cent of any interest earned from an Australian bank account withheld for tax.

Flavel said: "The tax situation has to be equivalent to the way investors would be taxed in Hong Kong or Singapore. You would need to get rid of the withholding tax."

Flavel said it was an opportune time for Australian banks to be expanding in Asia. He said groups like UBS and Citi had suffered considerable brand damage in the region and affluent customers were shopping around.