Mr FITZGIBBON (5:18 PM) —The seven bills we are considering today constitute a meaningful package of changes to the cost recovery and other levy arrangements for regulatory financial agencies. The bills make changes to the current system of determining how the funding burden is to be distributed between those financial entities that are subject to regulation by government authorities. The levies paid by financial entities fund the majority of costs incurred by sector regulators including the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and of course the Australian Taxation Office. Currently these levies are imposed on financial institutions to support the operational costs of the Australian Prudential Regulation Authority and certain consumer protection and market integrity functions of the Australian Securities and Investments Commission and the Australian Taxation Office.

In 2002-03, financial sector levies raised $75 million. At present, a levy rate per dollar of assets is subject to minimum and maximum amounts for institutions in each of the industry sectors. Levy rates are set to take into account the amount of time spent on the supervision of the various sectors. Superannuation funds contribute around 40 per cent of levy revenue, authorised deposit taking institutions contribute 30 per cent and insurers and retirement savings account providers contribute the remainder. For some time, smaller financial institutions have argued that they bear a disproportionate share of the burden under the current arrangements. They have argued that the cap on the maximum amount payable means that, for example, large banks involved in complex transactions pay only a little more than smaller authorised deposit takers with relatively straightforward operations.

In October 2002, the government established a review of the levy arrangements. The review and the government’s response were released in May 2004. The most significant recommendation arising from the review was the separation of the levy into two components—the first based on the cost of supervision, subject to a cap of $1.5 million; and the second based on ‘system impact and vertical equity’ considerations, with no cap. It was recommended that the second element should make up 10 to 30 per cent of APRA’s funding requirement. The government has accepted this proposal and these bills make the necessary legislative changes.

The bills propose two elements of financial sector levies. One element is based on the cost of supervision and is calculated on a percentage levy rate on assets set on minimum and maximum amounts. This is similar to current arrangements but involves greater equity through these maxima and minima amounts. The second element relates to the potential financial sector impact of a financial institution. It is a low percentage levy rate on assets. This also addresses vertical equity concerns with smaller institutions paying a proportionately lower amount as their stake in the total financial system is much smaller. Labor has consulted with the sector, in particular the Credit Union Services Corporation (Australia) Ltd, which has indicated broad support in principle for the bills before the House. However, it should be noted that these bills simply create a regulatory framework by which the relevant minister is able to set the fees. Labor will be closely monitoring the process by which these levies are set, to ensure that it preserves the policy intent of the bills and provides for appropriate consultation with the sector.

I note that these bills will lead to a new charging regime and potentially a series of new taxes. Every time the government approaches an election it promises that in office it will not increase or introduce any new taxes. However, the Clerk of the Senate has provided me with a list of all the new taxes and charges that the Howard government has introduced since coming to office in 1996. The current total number of new or increased taxes is now around 170. That is, of course, 170 broken promises by this—now, officially—the highest taxing government in Australia’s history. These bills add to this list of broken promises.

The Productivity Commission in a report in 2001 indicated that in the case of some of these agencies the charges exceeded the cost of the service. In the case of ASIC, for example, the revenue was $201 million in 1999-2000 while total expenses were only $139 million. Labor remains concerned that charges by financial regulators do not become a hidden form of taxation which will eventually inevitably be passed on to consumers. In fact, the Treasury has indicated that the new framework should result in a substantial increase in levies for the largest financial institutions. The opposition will continue to hold the government to account for the adequacy and effectiveness of the system of collecting levies to fund financial regulators. We will seek to ensure that consumers’ interests are protected and that charges are kept as low as is possibly practical.