Plundering to continue Finally, in light of vigorous denials by Treasurer Joe Hockey to Fairfax Media reports that the removal of the Section 25-90 provisions amounted to a back-flip, it is worth noting that the central rationale for the decision was that compliance costs would be too high. This defies all logic because if you remove something, you longer have to comply with it or even have a compliance regime. It is gone. Further to the denials, this from former tax office expert on withholding tax, Martin Lock: The Treasurer fails to mention that the so-called Australian company penalised if s.25-90 were repealed may be an Australian resident subsidiary company of a foreign-based corporate group. Section 25-90 does not discriminate according to the residency of the ultimate shareholders of the so-called Australian company: any company incorporated in Australia (done simply) can access the concession that the section offers. The failure to repeal s.25-90 will continue to allow a foreign-owned Australian resident company to claim tax deductions for interest paid on debt borrowed from related offshore entities and used to earn s.23AJ tax-free dividends. These are dividends arising from holding 10 per cent or more of the voting interest in shares that the resident company has in offshore companies. The deductions are claimable against any assessable derived from the companys Australian operations, reducing its overall Australian taxable income, even down to nil if the debt-loading is big enough. This practice is profit-shifting, and the failure to repeal s.25-90 will continue to allow at least some foreign-based companies to go on plundering Australias tax base in this way, claiming all the while to bring to this country the benefits of foreign investment. Happy New Year. Read more: smh.au/business/a-taxing-tale-of-two-peak-bodies-20150101-12gcty.html#ixzz3NcfiiXbJ
Posted on: Fri, 02 Jan 2015 01:21:04 +0000
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