Our assets are being bought by foreign investors because of our tax act - 31.01.24 (Gerard Rennick)

International Best Practice doesn’t mean to say it’s good for Australia.

I recently participated in a Senate Inquiry into Multinationals loading up their Australian subsidiary with to much related party debt.

Related party debt is where a Multinational lends money to its Australian subsidiary. Interest paid on this debt is transferred offshore. If abused, related party debt can be used to strip the Australian company of its profits, enabling less tax to be paid.

Thin capitalisation provisions seek to limit how much money can be lent into Australia. In short a Multinational can’t overload its Australian subsidiary with debt.

There is a move to cap the amount of debt to around 30% for non-ADIs.

In my view this is reasonable but of course the rent seekers aren’t happy as interest paid offshore can be taxed at a lower rate than interest earned onshore.

While this might be good for the Multinationals, it’s not good for Australia if the debt structure is not at arms length.

It’s not a question of International Best Practice, it’s a question of what’s good for Australia.



Another important clip from Senator Rennick dealing with the issue of foreign ownership of Australian assets. The "best practice" system in place at the moment is set up so that companies can avoid paying the full tax rate here and only end up playing around 10-15 percent or less. What they do is import huge amounts of debt from overseas onto their books that is then used to minimize the profits. The stiffs under question pretty much shrug their shoulders and squawk "it's the international standard/best practice" .... but for whom is it really benefiting? Money gets siphoned out of the country. That's no way to run anything.

To the question of requiring 'international finance' to get things done here, the Senator has pointed out that there is enough capital available in Australia if the system were set up to facilitate its use. The present set up looks like a gamed system. It stinks.

We have intelligent clowns in suits, playing along for their paychecks, and not giving a stuff about what is actually going on. This seems to be a very familiar pattern. People in love with their paychecks while the house is burning down. This is a very real and serious problem to be fixed.

[Posted at the SpookyWeather2 blog, February 25, 2024.]