IFSA report on making Australia a supplier of funds management to the world
The Investment and Financial Services Association has released Part 2 of Lateral Economics’ report into the export potential of Australia’s funds management industry. The report is titled: Other people’s money: Making Australia a supplier of funds management to the world.
The report asks why an industry that is highly sophisticated and cost competitive and which is the fourth large in the world, earns little of its revenue from managing foreigners’ investments that is from exports.
According to IFSA, the financial services industry has concentrated largely on domestic concerns and getting the regulatory system reforms bedded down. They now have a credible and capable domestic regulatory system that, to date has focused predominantly on domestic concerns. It has a creditable record of serving the needs of Australian investors.
If the report had one finding, if it stood for one proposition, it was that global funds management could not be provided competitively to foreign investors except with the responsive collaboration of Australia's tax and regulatory systems.
A global fund is domiciled in one country, holds assets in other countries, and may have investors from several other countries as well. Throw in the network of bilateral tax treaties and the complexities are enormous.
Because of this, those countries that have become global fund management hubs have assiduously aligned their tax and regulatory systems to facilitating global funds management.
This is not about tax avoidance. Fund managers domiciled in Australia managing foreigners’ money will continue to pay company tax on their profits, but their foreign investors should not be caught up in taxation which is often the inadvertent result of a domestically oriented tax regime.
According to IFSA, Australia has made great strides in the last five years in addressing some of the worst problems. However, the established and emerging financial services hubs are still proactive in ensuring that their tax and regulatory systems facilitate global funds management. They are looking forward to further exploring Lateral Economics’ ideas for improving its performance.
22-Aug-2007