Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

The government will not be supporting the amendment moved by the opposition, and I will outline the reasons why. Firstly, as to process, this amendment was circulated in the Senate chamber only some five minutes ago. I understand it was foreshadowed in the House of Representatives debate, but the amendment did not turn up. The government and I understand Treasury offered to provide a briefing to the opposition because they expressed an interest and concern in regard to the issue on which they have now produced an amendment, but I am advised they did not take up the offer. If they had, at least the advice I am provided with could have been outlined to them.

The government already maintains a register of all holders of Commonwealth government securities, CGS, and the Reserve Bank of Australia provides this service. The ABS releases the data that it can, based on the legislative and governance framework it operates within and confidentiality assurances provided to the companies it surveys. Senator Coonan referred to a wall of silence, which I think was a touch misleading. There are legislative requirements on the ABS in terms of data collection and the public provision of the identities of individuals who provide that data. Secrecy provisions and confidentiality provisions apply not just in this area but right across the ABS in respect of the surveys that take place. Those arrangements for confidentiality and the secrecy provisions have existed for many years and go back under previous federal governments. Let us assume the secrecy provisions were varied in terms of the ABS. What would be the response of industry which ABS surveys? I would be surprised if it did not have somewhat less accurate information, to the extent it is accurate in terms of the detail that the opposition is seeking. I will come to the issue of the level of detail and accuracy of data that is provided to the ABS, even if it were publicly released.

Senator Coonan mentioned that the US release this data. However, the opposition amendment goes far beyond that which is released in the US, as I am advised. Further, this does not necessarily, by the opposition’s own admission, show the true owners of the bonds. If you go to the release of the information in the US, it does not give you the true owners of the bonds but shows the custodians. There are probably about 15 to 20 custodian entities in Australia. I am not sure of the precise number, but there would be a relatively small number that operate in Australia. If you provided, for example, information on custodians, you would not know who the true owners are, because the custodians are exercising an authority on behalf of literally thousands of investors both from in Australia and certainly from overseas. So the US release of data of custodian entities is not comparable, and the level of detail sought via this amendment is not provided in the US. In fact, the US Federal Reserve Board has said in respect of the register that Senator Coonan has referred to:

… the involvement of chains of intermediaries in the custody or management of securities frequently makes accurate identification of the actual owners of U.S. securities impossible.

So, according to US Federal Reserve Board, it is impossible to find the actual owners of the securities on this register in the US.

Similarly, the proposed amendment would not provide reliable information on the ultimate beneficial owner of Australian government securities. Senator Coonan referred to jurisdictions such as the Cayman Islands. I am not sure what the total economy and population size of the Cayman Islands or Bermuda are, but I am advised those two jurisdictions hold 10 per cent of the ownership of world bonds. Ten per cent is an extraordinary figure given the very small size of their economies. I suggest that is for the reason that they are effectively tax minimisation, tax shelter centres. Who owns these bonds that are held very significantly by the Cayman Islands and Bermuda? The great difficulty is—and it is unfortunate, I would agree—we do not know. If you have this register that says, ‘This particular proportion of bonds issued by Australian governments is owned by an entity in the Cayman Islands or Bermuda,’ you cannot actually find out who owns the bonds. It is of extraordinarily limited use just being able to tell us the Cayman Islands and Bermuda own 10 per cent of the world’s bonds, because we do not actually know who the owners are behind them.

The opposition have asked the AOFM to carry this out. This would impose additional costs on the AOFM, as it does not currently provide the service. In turn, of course, the amendment asks the AOFM to provide this service for the states’ and territories’ securities, and that is not something it carries out at the moment. Treasury have advised that this reduction in confidentiality—to the extent you could actually have transparency, which is very limited—may also reduce demand for Australian bonds by wholesale and retail investors. That would obviously have some implications for the cost of borrowing. So the proposal, in turn, would impose additional costs on the taxpayer for information that would distort rather than provide additional clarity and information, if in fact it could be obtained, and in most cases it is actually very difficult, if not impossible, to obtain who the true owner is. So we do not see the necessity for this amendment.

As I have mentioned, the US register, as it is referred to, is not comparable to what the opposition is seeking here and just the practicalities of identifying true owners mean that it would be very difficult. I think it would be desirable to find the true ownership, but under current world financial arrangements it is impossible to identify accurately who the true owners are. I wish it were otherwise, but there is nothing we can do with this legislation via an amendment on disclosure, which is practically not going to work and would impose additional regulatory costs, to change this situation. So why take this approach if you cannot obtain the information? What would be imposed is the AOFM attempting to find the information, most of which it could not find or would be very limited, and that would have to be done at significant additional cost. They have got to do it for the state and territory governments. So those are the practical reasons.

I note that Senator Coonan says, ‘We want the AOFM to use best endeavours.’ I have outlined why best endeavours are not going to provide us with any significant level of detail, so best endeavours impose an additional cost on the AOFM to try and do a worldwide search for true bond ownership. Is that best endeavours, that we have AOFM officers scouring the world trying to find out the true owners of these bonds, taking a trip over to Bermuda and the Cayman Islands? Frankly, you would have to put the financial entities under some sort of surveillance to see who is going in or out. You would have to get AUSTRAC to be tracking through Bermuda, the Cayman Islands and Switzerland. It is just not possible; they do not allow that to happen. As I say, I wish it were otherwise. So this is an impractical suggestion that imposes additional costs for no outcome that we can see and that would not create any greater transparency. Comparisons with the US are not correct. As I have said, the US Federal Reserve Board has admitted that the actual owner identification of US securities is impossible. I do not have any brief on New Zealand. I will endeavour to obtain it. Again, we would be very surprised if what is being proposed by the opposition is in any way, shape or form being produced by the New Zealand government at the level of detail that is being sought here. So we do not support the amendment.