Bruce Le Bransky, Associate Director, Financial Risk Management said:
'KPMG agrees with the Inquiry's overall conclusion that the Australian financial system has "performed reasonably well" in meeting the financial needs of Australians and facilitating productivity and economic growth, and that in many areas the current system is operating effectively.
But we note that follow-up submissions to the Inquiry on the identified policy options close on 26 August. KPMG is concerned that the proposed timeline, including for the completion of the Final Report, is too short in light of the structure of the Interim Report and the extent of the identified policy choice responses. Options range from no change to present arrangements to significant revisions of current policy arrangements and settings. The Interim Report makes limited recommendations at this time. Instead it makes a series of observations that are largely driven from the submissions it has received which are categorised under nine "Priority Issues".
The Inquiry emphasises the importance of market forces and competition as the underlying basis for deciding the appropriateness of Government intervention and regulation of the financial system (including any cost-benefit analysis of such actions). In this respect the Inquiry sees merit in retaining the "four pillars policy" with respect the banking system.'
Jenny Clarke, KPMG Financial Services Tax Partner, said:
'We are disappointed that the Inquiry has effectively deferred all major tax issues to the white paper process. Just 14 pages out of 460 are devoted to tax, yet there are many financial services–specific tax subjects which we feel the Inquiry could reasonably have been expected to give direction on. Some of these issues will not be given the degree of attention needed in a broader white paper. For example, the current interest withholding tax regime is already a disincentive for foreign investment into Australia and if interest rates drop further, this barrier will become even greater. This is an area where Australia is uncompetitive, internationally, and when combined with our relatively tough new Thin Capitalisation regime, acts as a drag on foreign investment. Dividend imputation is another area where we would have liked to see the Inquiry give some leadership by making recommendations for an optimal system in today's international environment.'