Michael Keenan (Stirling, Liberal Party, Shadow Minister for Justice, Customs and Border Protection) Share this | Hansard source

I rise to speak on the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011 and related bills. What we see with these bills is a lazy piece of policy making that is designed to recoup the costs that are associated with Labor's failed economic management. The purpose of these bills is to fulfil Labor's 2010-11 budget commitment to recover the costs of AUSTRAC's supervisory activities from 1 July this year. I could not characterise the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Bill 2011 any better than it was characterised by the Association of Superannuation Funds of Australia, ASFA, when they said that this bill was akin to asking the Australian Taxation Office to charge taxpayers a fee to lodge their returns.

The bills place a large burden on reporting entities, depending on how much they earn. The initial proposal from the government was to charge all reporting entities to recover the costs of running AUSTRAC, but, after a lot of those entities voiced their opposition—and rightly so because they were to be levied $500 at a time—the government revised their proposal, so now this levy is only going to apply to larger entities. I understand that only 199 of the largest reporting entities will be taxed. Those large entities will obviously be places like banks and casinos and people who you might say are able to pay the levy, but, at the end of the day, somebody always pays when the government levies a new tax. This is not a large amount of money in the scheme of things, but, regardless, this is still poor policy-making.

As we know, a Senate committee is looking into the bills and is due to report on 16 June. In a submission to the committee inquiry, the Law Council of Australia noted their concerns about the bills and about their profession falling under the reporting obligations. The Law Council said:

If law practices become subject to AML/CTF—

that is, anti-money-laundering and counterterrorism financing—

reporting obligations and consequently the cost recovery regime, the Law Council would have particular concerns about the impact on smaller firms.

…   …   …

The proposed cost recovery levy, which would apply other than beyond a legal practice's compliance costs, would almost certainly lead, in the Law Council's opinion, to an increase in the cost of legal services, making such services less affordable.

The Law Council makes a valid point which would no doubt be of concern to many businesses and institutions across Australia. There are also concerns that the levy will place Australia and its financial institutions at a substantial competitive disadvantage. This is what happens when you levy new taxes that are not levied on other players within our region. Citigroup wrote in their submission to the committee that the levy will have unintended consequences in relation to Australia's ability to compete in the Asia-Pacific region, given the additional significant costs that the levy will impose on Australian financial institutions. They said:

We recommend that the composition of the levy be reassessed to ensure a more equitable distribution reflective of the designated services that AUSTRAC monitors and supervises.

The government's rationale for basing the large-entity component of the levy on the earnings of the entity group is that AUSTRAC incurs greater expenses in regulating larger entities because larger entities have more customers and usually provide more complex products. However, this calculation does not take into account the extent to which a leviable entity's earnings are related to the provision of designated services.

Due to this, an entity with high earnings may incur a large-entity component even though the entity only provides a small volume of designated services. There is a potential that the levy will have a disproportionate effect on those large entities which only provide designated services as an incidental part of their businesses.

I have already stated what some of the industry associations have been saying about these bills. I particularly like ASFA's way of characterising it. I also note that the Australian Bankers Association director Tony Burke said that the government's clear objective was to recover costs rather than provide any benefit to those subject to the regulation. He is quoted in an article:

"As the paper currently stands, the potential cost of compliance would be high," he said. "Charge-backs to internal groups and agencies would add significant overheads in tracking costs and reconciling payments."

The same article goes on:

Institute of Chartered Accountants executive general manager Lee White said members already incurred significant costs in supporting AUSTRAC's regulatory aims, and it was unreasonable to ask them to bear more.

"Our members provide legitimate services to clients who overwhelmingly are law-abiding individuals and businesses," he said.

"If these legitimate services are exploited by criminals, it is these wrong-doers who create the need for regulation and who should contribute to the costs through the confiscated proceeds of their crimes."

I think those comments from industry really go to the heart of this bill. The services that AUSTRAC provide are not necessarily services direct to the reporting entities that have been charged under this legislation. As I said, it is not a large sum of money so you will not find an enormous public outcry but that does not mean that it does not represent bad policy making. It is not reasonable for the government to recoup the costs of running every government agency if that government agency is providing a public service rather than providing direct services to the people who are being asked to pay for them.

AUSTRAC does provide a very valuable service but we believe that it is not reasonable to come back and to ask the 199 largest users to cover the costs of its running, particularly when really this is all about filling the budget black hole that Labor have created for themselves from their enormous wasteful spending up to this point.

We will not be opposing the bill in the House, although we do reserve the right to move amendments in the Senate based on the outcome of the Senate committee report.

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