The Senate Select Committee on Australia as a Technology and Financial Centre Second interim report April 2021 © Commonwealth of Australia 2021 ISBN 978-1-76093-220-6 (Printed Version) ISBN 978-1-76093-220-6 (HTML Version) This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. The details of this licence are available on the Creative Commons website: https://creativecommons.org/licenses/by-nc-nd/4.0/. Printed by the Senate Printing Unit, Parliament House, Canberra Committee Members Chair Senator Andrew Bragg LP, NSW Deputy Chair Senator Marielle Smith (from 19.9.2019 to 8.10.2020) ALP, NSW Senator Kimberley Kitching (from 8.10.2020; Deputy Chair 9.10.2020) ALP, VIC Members Senator Susan McDonald NATS, QLD Senator Paul Scarr LP, QLD Senator Jess Walsh ALP, VIC Senator Rex Patrick IND, SA Secretariat Lyn Beverley, Committee Secretary Christopher Sautelle, Principal Research Officer Amy Dowler, Principal Research Officer Margaret Cahill, Research Officer Shannon Ross, Administrative Officer Committee Webpage: http://www.aph.gov.au/senate_FinRegtech PO Box 6100 Phone: + 61 2 6277 3535 Parliament House Fax: + 61 2 6277 5818 Canberra ACT 2600 Email: [email protected] Australia iii Table of contents Committee Members ........................................................................................................................ iii List of Recommendations ............................................................................................................... vii Executive Summary ........................................................................................................................... xi Chapter 1—Introduction .................................................................................................................... 1 Introduction .......................................................................................................................................... 1 First interim report ............................................................................................................................... 1 Second interim report .......................................................................................................................... 1 Final report ............................................................................................................................................ 2 Chapter 2—Tax issues ........................................................................................................................ 3 Competitiveness of corporate tax settings ........................................................................................ 3 R&D tax incentive ............................................................................................................................... 6 Interest withholding tax .................................................................................................................... 17 Employee share schemes ................................................................................................................. 22 Offshore Banking Unit ...................................................................................................................... 24 Patent box policies ............................................................................................................................. 26 Chapter 3—Regulation issues ......................................................................................................... 29 Consumer Data Right ....................................................................................................................... 29 Big Tech platforms and app marketplaces ..................................................................................... 45 Digital ID reforms and identify verification issues ....................................................................... 48 Coding law and 'Rules as Code' ....................................................................................................... 52 Chapter 4—Access to capital ........................................................................................................... 57 Shareholder arrangements ............................................................................................................... 57 Capital raising by listed entities ....................................................................................................... 67 Foreign investment ............................................................................................................................ 73 Chapter 5—Blockchain and digital assets .................................................................................... 77 Blockchain ........................................................................................................................................... 77 Chapter 6—Issues relating to culture and skills ....................................................................... 103 Introduction ...................................................................................................................................... 103 Attracting global talent.................................................................................................................... 103 Domestic talent ................................................................................................................................. 121 v UK-Australia FinTech bridge ........................................................................................................ 125 Chapter 7—Conclusions and recommendations ....................................................................... 129 Tax issues (Chapter 2) ..................................................................................................................... 129 Regulation issues (Chapter 3) ......................................................................................................... 130 Access to capital (Chapter 4) .......................................................................................................... 135 Blockchain and digital assets (Chapter 5) ..................................................................................... 136 Culture and skills (Chapter 6) ........................................................................................................ 138 Additional Comments from Senator Paul Scarr ........................................................................ 143 Appendix 1—Submissions, additional information and answers to questions on notice 147 Appendix 2—Public hearings and witnesses ............................................................................ 159 vi List of Recommendations Recommendation 1 7.5 The committee recommends that the Research & Development Tax Incentive be amended to allow for: different assessment methodologies to be used; and quarterly payments to successful applicants. Recommendation 2 7.6 The committee recommends that the Australian Government consider the establishment of a separate software-specific tax incentive scheme. Recommendation 3 7.8 The committee recommends that the Australian Government consider abolishing interest withholding tax, in line with recommendations from the Johnson Review. Recommendation 4 7.18 The committee recommends that the Australian Government and relevant agencies pursue mechanisms to increase international participation in the Consumer Data Right (CDR) and interoperability with similar schemes in other jurisdictions, including by: driving the establishment of International Open Banking standards and broader standards relating to data sharing and consent management; and establishing mutual recognition arrangements for accreditation under the CDR and relevant schemes in other jurisdictions, in particular the United Kingdom. Recommendation 5 7.22 The committee recommends that the Australian Government, through Treasury and other relevant agencies, review and publicly report on what additional rules and safeguards may be required in the event that large non- bank digital platforms were to seek accreditation under the CDR regime. Recommendation 6 7.25 The committee recommends that the Australian Government develop consumer 'nudge' mechanisms to be incorporated into the design of the CDR regime, to ensure consumers are periodically made aware of their ability to find better products and services through the CDR. vii Recommendation 7 7.30 The committee recommends that, pending any relevant findings of the ACCC, the Australian Government consider whether an access regime for app marketplaces may be necessary in order to ensure fair and equitable access for app developers. Recommendation 8 7.34 The committee recommends the Australian Government review the ability for businesses to access relevant information from government registers (including ASIC registers and AEC electoral roll data) for the purposes of facilitating identity checks and offering Digital Identity services, particularly in comparison with how this access is facilitated in similar jurisdictions overseas. Recommendation 9 7.41 The committee recommends that the Australian Government establish a Commonwealth 'Rules as Code' innovation hub, accompanied by a regulatory sandbox, to advance legal coding approaches to Commonwealth legislation and regulation. Recommendation 10 7.43 The committee recommends the Australian Government provide for an Australian scheme