The Sydney Morning Herald http://www.smh.com.au/news/9905/11/text/business10.html ConsPress battles Tax Office, again Date: 11/05/99 By ANNE LAMPE Armed with three Queen's counsel, a barrister, a solicitor and a cavalcade of tax officials, the Tax Commissioner yesterday launched a Federal Court test case appeal against a decision that let Mr Kerry Packer's Consolidated Press Holdings Ltd off a $260 million 1991 tax bill. Lined up on the Packer side of the bar table during the four day appeal are two silks and a barrister and behind them two solicitors. Watching intently from the public section of the court is Mr John Cherry, Ernst & Young's tax adviser, who has provided the key tax advice to the ConsPress group. The appeal against last October's decision by Justice Graham Hill is breaking new ground. At issue are a series of complex and esoteric sections of the Income Tax Assessment Act involving foreign sourced income and related deductions claimed in Australia. Mr Brian Shaw, QC, leading the Tax Office team, told the court there are several legs to the appeal - quarantined interest and cost deductions against foreign sourced income (section 79D), dividend stripping involving the liquidation of a UK subsidiary and transferring its assets to a tax haven, tax avoidance under Part IVA of the Tax Act, and tax defeasance. ConsPress is appealing on a point won by the Tax Office relating to thin capitalisation of a subsidiary. The Packer money that is the subject of the appeal swirled between Singapore, Australia, the UK and the Bahamas before ending up back here but not in a form that the Packer camp and Justice Hill say is taxable. The "scheme", as Mr Shaw labelled it, had involved both loans and dividends of hundreds of millions of dollars, metamorphosis of loans to shares and money and assets moving swiftly around the world, and the Tax Office had missed out on $260 million in tax revenue. In a background briefing paper, Mr Packer's legal firm, Gilbert and Tobin, said that tax paid by the ConsPress group of companies between 1989 and 1993 exceeded $150 million with a total of $400 million paid over the past three years. The genesis of the dispute goes back to 1989 when ConsPress Finance borrowed $US240 million and on-lent it to ACP. ACP then took shares in another wholly owned subsidiary, Murray Leisure Group. MLG in turn invested in a London-based offshoot, ConsPress International Holdings, to bid for BAT Industries. The takeover didn't eventuate and so CPIH didn't generate the expected revenue. But ACP deducted all the borrowing costs against its income, in the process slashing its tax bill. The hearing continues. This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited. ************************************************************************* This posting is provided to the individual members of this group without permission from the copyright owner for purposes of criticism, comment, scholarship and research under the "fair use" provisions of the Federal copyright laws and it may not be distributed further without permission of the copyright owner, except for "fair use." -- Leftlink - Australia's Broad Left Mailing List mailto:[EMAIL PROTECTED] http://www.alexia.net.au/~www/mhutton/index.html Sponsored by Melbourne's New International Bookshop Subscribe: mailto:[EMAIL PROTECTED]?Body=subscribe%20leftlink Unsubscribe: mailto:[EMAIL PROTECTED]?Body=unsubscribe%20leftlink
