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Wednesday, 9 February 2005
Page: 42

Senator SHERRY (12:21 PM) —We are considering a package of seven bills—the Superannuation Supervisory Levy Imposition Amendment Bill 2004, the Authorised Deposit-taking Institutions Supervisory Levy Imposition Amendment Bill 2004, the Life Insurance Supervisory Levy Imposition Amendment Bill 2004, the General Insurance Supervisory Levy Imposition Amendment Bill 2004, the Retirement Savings Account Providers Supervisory Levy Imposition Amendment Bill 2004, the Authorised Non-operating Holding Companies Supervisory Levy Imposition Amendment Bill 2004 and the Financial Institutions Supervisory Levies Collection Amendment Bill 2004—that relate to the issue of levy imposition on a range of financial institutions in order to substantially fund the operation of the regulators, the Australian Prudential Regulation Authority, commonly known as APRA, and the Australian Securities and Investments Commission, in carrying out their functions of regulating financial institutions in this country. The Labor Party are supporting the package of bills relating to changes in the levy arrangements. To that extent, it is uncontroversial. We are supporting the legislation without amendment. However, the issue of levies and their application is a relatively controversial issue, and I will touch on some of the matters about the controversial application of the levies in my contribution. However, I have one suggestion—and I make this in a positive way. We have seven bills before us. It would be useful if a way could be found for us to be able to change future levy arrangements, if and when they need to be changed, in one bill rather than in seven.

Having said that, the bills make changes to the current system of determining how the funding of a number of organisations is to be distributed between financial entities subject to regulation by government authorities. As I have mentioned, these include the regulators: the Australian Prudential Regulation Authority, APRA; the Australian Securities and Investments Commission, ASIC; and the Australian Taxation Office, the ATO. Currently these levies are imposed on financial institutions to support the operational costs of these organisations. These costs are incurred through activities such as the 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 approximately $75 million. At present, a levy rate per dollar of assets is subject to minimum and maximum amounts for institutions in each of these industry sectors. The levy rates are set to take into account the amount of time spent on the supervision of the various sectors. For example, 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. I wish it were that simple, because within each sector—for example, the superannuation industry—there is a range of subsectors.

For some time small financial institutions have argued that, under the current arrangements, they bear a disproportionate share of the burden. They have argued that the cap applying to the maximum amount payable means, for example, that large banks with complex transactions effectively pay a smaller amount and that this is passed on via a higher levy to smaller authorised deposit takers with relatively straightforward operations.

In October 2002, the Liberal government established a review of the levy arrangements. The review and the Liberal government’s response were released in May 2004. The most significant recommendation arising from that 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 per cent to 30 per cent of APRA’s funding requirement. This proposal has been accepted by the government and it is contained in the bills we are considering.

The legislation proposes two elements of financial sector levies. One element is based on the cost of supervision and is calculated on the 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 and is a low percentage levy rate based on assets. This also addresses vertical equity concerns, with small institutions paying a proportionally lower amount as their stake in the total financial system is smaller.

Labor has both consulted widely with the sector through direct representations received from various elements within the finance industry sector and had the ability to receive and test submissions and hear evidence through a number of committee hearings. In particular, I want to thank CUSCAL, which is the acronym for the Credit Union Services Corporation (Australia) Ltd, which has given broad support in principle to these seven bills. It is not the only organisation, but I know it liaised extensively with Mr Joel Fitzgibbon, the Labor shadow Assistant Treasurer, in the other place.

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, of course, be closely monitoring the process by which these levies are set in order 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, as they are based on the tax power.

Every time the Liberal government approaches an election, it promises that in office it will not increase or introduce any new taxes. However, last year the Clerk of the Senate provided me with a list of all new taxes and charges that the Howard Liberal government has introduced since coming to office in 1996. For the information of the Senate and the thousands of people listening to this broadcast, the Howard Liberal government—despite its original commitment back in 1996 that it would not ‘increase or introduce any new taxes’—at the current new tax count, has introduced a total of 170 new or increased taxes; that is, 170 increased or new taxes since it was elected back in 1996.

Senator George Campbell —No wonder they’re the highest taxing government ever.

Senator SHERRY —You have stolen the words directly out of my mouth, Senator Campbell. That represents 170 broken promises by what is the highest taxing government in Australia’s history—and these bills will add to that list of broken promises.

In a 2001 report, the Productivity Commission indicated that, in the case of some of these agencies, the charges exceeded the cost of the service. In the case of ASIC, in 1999-2000, revenue was $201 million but total expenses were only $139 million. That 2001 report is interesting because it shows how this Howard Liberal government has broken its commitment and overlevied in some areas in order to increase, by stealth and shadowy measures, its revenue take while at the same time publicly claim it is not doing so.

Labor do remain concerned that charges by financial regulators do not become a hidden form of taxation. Of course, these charges, levies and taxes are passed on to consumers. Whether a superannuation fund is large or small, it effectively comes off their rate of return. In fact, the Treasury has indicated that the new framework should result in a substantial increase in levies for the largest financial institutions. The Labor Party will continue to hold the Liberal government accountable for the adequacy and effectiveness of the system of collecting levies to fund financial regulators, and we will seek to ensure that consumer interests are protected and the charges are kept as low as practical. With those remarks, I conclude by saying that the Labor Party will be supporting the seven bills.