Speech on Amendments and New Clauses to be Movedby the Minister assisting the Treasurer the Hon. Peter Baldwin, M.P.
Mr. Speaker, on behalf of the Government I move the amendments and new clauses being circulated.
I would make the general comment that the Government's decision to introduce a concessional offshore banking regime in Australia has been applauded by the banking and finance industry.
Since the OBU legislation was introduced into Parliament in June the extensive consultation with industry bodies has continued and many of the amendments being moved are the consequence of the Government accepting much of what industry proposed.
Given the Government's commitment to establish Australia as a viable offshore banking centre their requests have largely been accommodated. However, the Government response has had to balance industry submissions against the need to ensure that there is little risk of revenue leakage by current domestic activity moving into offshore banking.
The Government would like to take this opportunity to thank all those involved in the consideration of the issues.
While quite a few amendments are being made, it is the Government's view that the rules governing offshore banking should be clarified sooner rather than later so that participants can get on with the task of establishing a viable offshore banking industry.
In particular, industry have sought some widening of the scope of the activities, to include some additional transactions which are of the same types as those originally included in the Bill. These have been accommodated to a large entent in the amendments being moved.
They have also asked for an extension of the interest withholding tax exemption on offshore borrowings by OBU's to cover funds raised for use in offshore banking activities other than lending. The Government has agreed to this proposal which is consistent with the existing exemption for borrowings used in lending activity.
Wholly owned subsidiaries of banks are to be permitted to be registered as OBUs so that activities like funds management are not carried on by licensed banks.
This will meet the concerns expressed by the Reserve Bank who were concerned that their approaches to risk management would result in a higher capital adequacy requirement if activities like funds management were conducted directly by a bank.
The opportunity has also been taken to tighten certain aspects of the anti-avoidance provisions and some minor technical deficiencies are being corrected.
As currently drafted, the anti-avoidance provisions rely on matching the source and application of funds.
This would present enforcement difficulties in the context of bank treasury operations, given that money is fungible - that is, it loses its identity when mixed in a pool of funds.
The amendments will allow a slightly different approach that tackles the potential mischief but does not rely on tracing.
Finally, to assist readers in using the legislation, a new clause is to be inserted, which sets out in simple terms the object of the legislation, the main concepts of the concessional tax regime and how the provisions fit together.
The amendments are not expected to have any financial impact.
I commend the amendments and new clauses to the House.