HSBC calls for tax removal
(20 December 2010 – Australia) HSBC’s Australian arm has called on policy setters to abolish two tax measures that currently prevent the global bank, and other foreign-owned institutions, from competing with the big four banks.
In a submission to the Senate economics committee inquiry into banking, the international lender highlighted that banishing interest withholding tax and a law that makes its more expensive for Australian subsidiaries to borrow money from their overseas-based parents, would make it more plausible for international banks to source additional funding for lending.
Introduced in 1967, interest withholding tax helped to collect tax on Australian-sourced income from non-residents.
This in turn means that banks like HSBC have to pay a further 10 percent in tax on the interest they pay for funds lent by their global parents.
HSBC claims that this measure discourages Australian subsidiaries from bringing over surplus funds held in other markets to fund their loan books, such as mortgages.
Paulo Maia, HSBC’s Australian chief executive, said that with the global mobility of capital it [the tax] has been the key impediment to the growth of foreign banks in Australia.
The federal government has so far responded to such calls to abolish the tax - which was recommended in the tax review conducted by the Treasury secretary, Ken Henry - by deciding to reduce its percentage take to 7.5 percent in 2013-14 and to 5 percent a year after that.
However, HSBC says its 'immediate removal would lead to an immediate flow of funding to Australia which would lead to lower rates for customers'.
Introduced in 1967, interest withholding tax helped to collect tax on Australian-sourced income from non-residents.
This in turn means that banks like HSBC have to pay a further 10 percent in tax on the interest they pay for funds lent by their global parents.
HSBC claims that this measure discourages Australian subsidiaries from bringing over surplus funds held in other markets to fund their loan books, such as mortgages.
Paulo Maia, HSBC’s Australian chief executive, said that with the global mobility of capital it [the tax] has been the key impediment to the growth of foreign banks in Australia.
The federal government has so far responded to such calls to abolish the tax - which was recommended in the tax review conducted by the Treasury secretary, Ken Henry - by deciding to reduce its percentage take to 7.5 percent in 2013-14 and to 5 percent a year after that.
However, HSBC says its 'immediate removal would lead to an immediate flow of funding to Australia which would lead to lower rates for customers'.
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