BUDGET 2003 - INTERNATIONAL TAX REFORM Progress achieved on International Tax Reforms Sydney, 14 May, 2003: The Australian Bankers’ Association (ABA) welcomes the progress achieved on the Federal Government’s reforms for improving the international competitiveness of Australia’s tax system. David Bell, Chief Executive of the ABA, said: “The reforms help to enhance Australia as a global financial centre by removing some impediments to firms operating at their full potential domestically and internationally.” “The ABA is pleased to see that the Federal Government has removed complexities in the existing system which discourage Australian firms investing offshore and overseas firms from investing in Australia. The ABA is looking forward to the consultation on the design of the legislation". The ABA welcomes the reform of: ‘double taxation’ -  presently  incomes from offshore subsidiaries or from investments in overseas funds are taxed in Australia, as well as overseas, and there is an onerous compliance burden to prove exemption. Changes include taxing income from subsidiaries from seven listed countries[1], only when it comes back into Australia; the application of foreign investment funds provisions and the capital gains treatment of non-residents investing in Australian managed funds. Refinements to these areas will hasten Australia’s positioning as a wealth manager for the region by reducing the impediments to offshore funds being managed in Australia; the taxation of branches - of particular interest to foreign multinationals wishing to operate a financial business in Australia. Mr Bell said: “This reform program will remove complexity and reduce compliance costs, however, not all of the objectives of the Review of International Tax Arrangements (RITA) have been achieved and there is still more work to be done.” “The banking industry would encourage the Federal Government to go further and adopt the Board of Taxation’s recommendations on some of the outstanding issues such as the imputation system. In particular, for example, allowing overseas investors to receive dividends from foreign earnings of Australian companies, free of Australian franking penalties.” “The current system leads to higher cost of capital for those countries which have expanded offshore.”   For further information contact: Heather Wellard ABA PR  Phone:     02 8298 0411 Mobile:    0409 830 439  ENDS [1] The seven countries to which the reforms will apply are Canada, France, Germany, Japan, New Zealand, the United Kingdom and the United States.