Sydney, 11 August, 2008: The Australian Bankers’ Association (ABA) looks forward to participating in the Tax Review because reforming the tax system to support our nation’s future prosperity is crucial.

The ABA welcomed the release of the Treasury report “Architecture of Australia’s tax and transfer system” which will stimulate debate and starts the consultation process of the Federal Government’s review.

At present Australia lags behind its major OECD peers in terms of ease of paying taxes, and has a complex tax regime comparable with countries in which financial services represents a very small proportion of GDP.

David Bell, Chief Executive of the ABA, said: “Our initial thinking is that there are many opportunities for reforms which will position Australia for the future.”

“Eliminating the withholding tax on foreign-raised deposits will enable Australian banks to raise deposits overseas for lending within Australia. It would provide banks with better access to liquidity and potentially reduce the cost of funding for customers.”

There are a number of options for enhancing the treatment of foreign source income for banks and other institutions in Australia, including dividend streaming and tax credits.  By reducing the “clipping of the ticket” by the Australian Tax Office, banks and other companies will be able to better compete offshore.

Mr Bell added: “There are a high number of business taxes in Australia.  The review must look at simplifying the tax regime – by focusing on the least efficient taxes.  Stamp duties are an obvious target, and we believe these can be eliminated, not just for business, but on residential property transactions as well.”

“Company tax as whole needs detailed analysis and re-design, in relation to rates, base and complexity.  There are instances, for example, where the costs of compliance and collection outweigh the benefits to tax revenue. Company tax should facilitate and not hinder growth in economic activity.”

“It is also time to take a look again at our national savings goals.  In this context, taxes on all savings products need to be reviewed, rather than looking narrowly at superannuation only.”

The ABA is pleased the Government has initiated this significant review and we look forward to participating in the Review’s consultations. If there are changes to the tax system which generally meet with widespread agreement, we would hope that the reform could proceed, rather than waiting until the Review’s report is tabled.

ENDS