Federal opposition leader Kevin Rudd has responded to the Government's largely well-received budget by announcing Labor would slash Australia's withholding tax in half to 15 per cent.
Federal opposition leader Kevin Rudd has responded to the Government's largely well-received budget by announcing Labor would slash Australia's withholding tax in half to 15 per cent.
The proposal was immediately welcomed by the Property Council of Australia and Investment and Financial Services Association (IFSA).
IFSA chief executive Richard Gilbert said Kevin Rudd had vision.
"The proposed reduction in the withholding tax will remove a significant and burdensome administrative requirement for non-resident investors and Australian fund managers," Gilbert told Investor Weekly.
Property Council of Australia chief executive Peter Verwer was equally supportive of Rudd's proposals.
"The Property Council of Australia applauds Mr Rudd's commitment to reform Australia's outdated withholding tax system," Verwer said.
Treasurer Peter Costello labelled Rudd's policy proposal a misguided priority.
"Rudd would rather give tax relief to foreigners than to Australians and I think that is a misguided priority," Costello said.
Australia's financial services sector has emerged as a large part of the nation's economy. According to government agency Axiss, the industry is the third largest sector in Australia's economy and accounts for $60 billion of gross domestic product.
For Verwer, foreign investment is critical to the sector's growth.
"The world wants to give us more of their money to manage, which is good for the country. The fees generated by the investment stay in Australia and build our capacity as a financial sector hub," he said.
He said if Australia's financial services sector wanted to attract more money from overseas, tax rates should be in line with international rates.
"The world is copying the Australian financial services model, but operating at lower tax rates and with less red tape. The Government's current proposal keeps us out of step with our international competitors," he said.
Costello said the measure would cost around $100 million a year.
According to a report from Econtech, however, a withholding tax rate of 12.5 per cent would result in a net loss to the budget of $1 million. Econtech did the costing for the Government's goods and services tax initiative.
In Part 2 of our exclusive series, we ask leading names to nominate their best investments, the most effective industry group and the importance of platforms.
Colonial switches managers »
Wealth management group Colonial First State has terminated Pengana and GMO from its FirstChoice platform.
Funds sell hotel to Malaysian firm »
Malaysian-listed company TA Enterprise Bhd has bought the Westin Melbourne Hotel for $160 million from a group of industry funds.
