Australian Financial Review http://www.afr.com.au/content/990514/news/news4.html May 14, 1999 Packer's $800m in Bahamas due to 'incredible patriotism' By Fiona Buffini Mr Kerry Packer's "incredible patriotism" explained why his international group shifted more than $800 million to the Bahamas in 1988. The claim, by Mr Packer's lawyers, came on the second day of the Federal Court dispute between the Consolidated Press group and the Australian Taxation Office this week involving around $260 million of additional tax. While the three-day hearing descended into the legal quagmire of dividend stripping, loss quarantining, thin capitalisation and debt defeasance, the public relations battle belied the court proceedings; the ATO had a media spokesperson on hand, while Gilbert & Tobin helpfully distributed background information, and took to the radio in their client's defence. "I think it's very difficult for somebody to mention tax and Packer in the same sentence, without coming up with the result that he must be avoiding tax, minimising it, or somehow using loopholes to his advantage, and it's just not the case," solicitor Ms Judy Sullivan told ABC radio on Tuesday morning. A statement circulated by Gilbert & Tobin said that in the years covered by the tax office audit that originated the dispute, Mr Packer's assessable income - that is, before reduced by any tax deductions or franking credits - was over $280 million. The three grounds of the ATO's appeal involve the taxation of offshore profits or the denial of tax deductions claimed in Australia by the CPH group. They claim a 1988 reorganisation of the CPH group which resulted in $823 million in profits and assets being transferred from UK companies, resident in Hong Kong - a low-tax jurisdiction - to new companies in the Bahamas - a zero-tax jurisdiction - was a dividend strip and tax avoidance. Mr Packer's lawyers claim it was patriotic. "I think that's incredibly patriotic when you look at the reason for doing this," Ms Sullivan said. "And the reason for doing the re-organisation was to actually move the holding companies for the international group to the Bahamas for the purpose that there was no tax paid there, there was no possibility of double tax, and that all the income was going to be returned in Australia and not anywhere else." The ATO claimed in court that all CPH had to do, to pay tax, was remit the profits to Australia. CPH claims that the restructuring resulted in $50 million in capital gains being taxed in Australia. Another issue - the so-called section 79D issue - involved interest deductions of $81,748,275 claimed by the CPH group in 1990, as part of its hostile bid for BAT Industries. Section 79D aims to stop companies claiming tax deductions for their expenses in Australia and keeping their profits offshore. As the BAT takeover did not eventuate, the Tax Office argued that CPH Property was not entitled to a deduction for the interest. The Full Court has reserved its judgement. c 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
