Some of the likely recommendations of a new Senate committee inquiry into Australia’s role as a regional financial centre can be gleaned from the report of an advisory group convened by Liberal Senator Andrew Bragg last year.
Bragg’s group, the Australia as a Financial & Technology Centre Advisory Group, called for the removal of withholding tax from a number of business activities, the development of other tax incentives and action on stalled or underdeveloped policy initiatives, such as the Corporate Collective Investment Vehicle.
Last week, the Senate agreed to change the remit of the Senate Select Committee on Financial Technology and Regulatory Technology, directing it to inquire into the prospects for Australia as a technology and financial centre.
The committee, which is chaired by Bragg, has been renamed the Select Committee on Australia as a Technology and Financial Centre and will report by October on “the size and scope of the opportunity for Australian consumers and business from Australia growing into a stronger technology and finance centre”.
The committee will look at the current policy environment and any corporate law restraints to investment.
The Australia as a Financial & Technology Centre Advisory Group was convened last August and included representatives from Ernst & Young, Macquarie Group, Perpetual, La Trobe Financial, JP Morgan, Nikko Asset Management, Minter Ellison, Zip Money and Afterpay.
It released a report in January, saying: “Despite Australia’s sophistication in financial services, global studies indicate that our relative competitiveness has been falling significantly and that Australian financial services exports remain negligible.
“Australia has many attractions as a place to base regional activities but these are offset by concerns about tax inefficiency, regulatory complexity and problems with the relocation process itself.
“It is important to note that we do not need to be the lowest tax jurisdiction or the most attractive in every measure. We simply need to rebalance the scales to prompt businesses and business leaders to take another look at Australia.”
The group made 14 recommendations. It called for the removal of the application of withholding tax to funds operating under the Asia Region Funds Passport program and also on borrowings on interest paid to foreigners who lend into Australia.
A number of inquiries, including the Henry Tax Review, have called for the overhaul or removal of withholding tax, which is widely criticised as anachronistic, administratively inefficient and not very productive in terms of the revenue yield because of the many exemptions that apply.
The group called on the government to complete the development of the Corporate Collective Investment Vehicle regime. The CCIV framework utilises a conventional company limited by shares but with features of the Managed Investment Scheme regime, such as flow-through tax treatment, incorporated into the design of CCIVs to maintain regulatory parity.
CCIVs are more commonly used overseas than the trust-based entities that are common in Australia. CCIV legislation was drawn up in 2018 but never went anywhere.
It called for the establishment of an Incremental Business Activity Rate regime, where companies establishing a qualifying business in Australia would receive a tax rebate for up to seven