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Tax reform urgent says ASX

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17 March 1999


The Australian Stock Exchange has told thjTSetiate' Select.Committee on a New Tax *73 £5y:yfe/n that the application of a Goods and ^SeivicesTax in Australia would facilitate the removal of a range of heavy tax burdens on share investment and on the efficient channelling of funds into investment.

“While ASX does not regard the GST as a panacea for all the ills of the tax system, the GST does allow Australia to remove the heavy tax burden on financial transactions through stamp duty on marketable securities, financial institutions duty and bank

accounts debit tax,” ASX said in its opening statement to Committee hearings in Melbourne today. .

ASX reinforced its view that these indirect State taxes: • place a harsh burden on ordinary citizens in their conduct of day to day financial transactions, • unduly add to the cost of capital, and • severely impede Australia’s position as a regional financial centre.

“ASX has taken the opportunity presented by the Committee hearings to restate our view that the abolition of these indirect taxes should be a priority,” said ASX Managing Director, Mr Richard Humphry.

“We have given the Committee the example of a $10,000 purchase of shares. The direct transaction costs include $3.76 for ASX trading and settlement, stamp duty of $30 and broker charges which vary but are typically about $60.

In other words. Government taxes represent one-third of transaction charges."

Mr Humphry said the benefits of the abolition of these indirect taxes would not be concentrated among a privileged few.

Our own studies show that 5.5 million Australians own shares. Of the households we surveyed, half had incomes between $30,000 and $50,000 a year and some form of share ownership,” he said .

“One in four households with annual income of less than $30,000 are direct or indirect share owners."

Mr Humphry noted that Professor Peter Swan, Professor of Finance at the University of Sydney, had produced estimates of the impact of the abolition of marketable securities duty, based on the experience of the halving of the duty by the Queensland Government in 1995. Professor Swan estimates that abolition will:

• reduce overall transactions costs by 27 per cent, -

• increase market liquidity (or average turnover) of shares by 60 per cent, • boost the market capitalisation of listed companies by $65 billion, and • create a potential capital gains tax windfall of $16 billion for the Federal Government through the increase in the value of shares.

Mr Humphry restated his call to the Australian business community to actively participate in the Federal Government’s consultative process aimed at appropriate business tax reform, echoing the comments of the Federal Treasurer, Mr Costello, that Australia should aim for a taxation environment where company taxes are lower, concessions are minimised and distortions lessened

Mr Humphry said that with the co-operation of the Senate and the business community, Australia was on the threshold of being a genuinely competitive financial centre in our region through: * ■

• abolition of marketable securities duty and financial institutions duty. • Lower tax on capital gains generally and specific reforms to encourage venture capital and • lower company tax.

For further information. Robin Hams 0418 631 201

Gloria Peterson 0419 496 703