Delays to Johnson implementation see new barriers emerge
Little more than seven years after the Johnson Report recommended the removal of barriers to Australia's financial services industry becoming internationally competitive, a follow-up report has revealed the emergence of new barriers, particularly withholding tax.
The follow-up report also pointed to the need for Australian Financial Services Licenses (AFSLs) to be recognised in more foreign jurisdictions, while noting that there is currently provision for mutual recognition of financial services licences in the free trade agreements that Australia has recently negotiated with China, Japan and Korea and that while Australia also recognises the financial services licences of funds from several foreign jurisdictions, often it is not reciprocated for Australian funds.
The Financial Services Council (FSC) has today released the so-called "Second Johnson Report" and has urged whichever party is elected at Saturday's Federal Election to urgently address the new barriers as well as those of the original Johnson Report which were never completely implemented.
The six new barriers to entry identified by the follow-up report are:
• Australia's overall withholding tax regime, beyond the specific instances identified in the original Johnson Report;
• Treatment of foreign exchange gains and losses under Australia's taxation rules;
• Lack of multi-currency class investment vehicles;
• Unique regulatory approach under the single responsible entity model;
• Lack of recognition of Australian financial services licenses offshore; and
• Uncapped liability on capital for responsible entities/product issuers.
Commenting on the second Johnson Report, FSC chief executive, Sally Loane, said that while the government had made some progress toward removing barriers that were preventing Australia from growing exports of funds management and other financial services to the region, more needed to be done.
"Only one of the original recommendations relating to funds management has been satisfactorily completed. Another 10 have either been commenced or committed to," she said.
"Critically, the report has identified another six barriers that have emerged since the original Johnson Report in 2009."
"There are many growth opportunities for Australia's funds management industry in our region and globally, but if we don't implement all Johnson's recommendations and dismantle the barriers, we may be left behind in this fast-changing market."
AUTHOR
Mike Taylor
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
