February 19, 2020

Australia: Angus Taylor says he did not set up Cayman Islands structure on $80m water buyback


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By Annie Davies From The Guardian UK

Angus Taylor denies a role in structuring Eastern Australia Agriculture which received $80m for a water buyback through a tax haven. Photograph: Lukas Coch/AAP

Energy minister was a director of Eastern Australia Agriculture but says he only advised on the agricultural side

The energy minister, Angus Taylor, has denied he played a role in structuring the company which received an $80m government buyback of its water rights through the tax haven of the Cayman Islands.

Taylor, who was a director of Eastern Australia Agriculture between 2008 and 2009 and who described himself as a co-founder of the company, told ABC Radio National on Thursday morning he was involved only in advising on the agricultural side of the investment.

He said he severed all involvement in the company prior to being elected to parliament.

EAA was paid $80m for its overland flow water rights without tender in 2017 when Barnaby Joyce was agriculture minister.

“I was a consultant and I was paid consultant’s fees,” he said. “That’s what consultants do. I never had an interest in the company or any related company nor did any of my family members,” he said.

“I concluded any relationship with the company before I entered parliament. I didn’t receive any benefit from the buybacks; indeed I wasn’t aware of them until some time after they happened,” he said.

Further questions have emerged because EAA’s parent is the company Eastern Australia Irrigation, which is based in the Caymans, a tax haven that reveals few details about the businesses based there.Advertisement

Asked why he set up a company domiciled in the Caymans, Taylor said he had not been involved in that part of the deal but defended it as a common structure.

“This structure and domicile is common practice. It’s used by many Australian super funds: CBus, Rest, Australian Super and the Future Fund,” he said.

“The reason for this structure is very simple: it’s to ensure that taxpayers pay tax, as they must, where they live.,” he said.

“It’s widely used by super funds and many, many of your listeners will be invested in these structures,” he said.

Caymans is a tax haven so investors pay no tax in that jurisdiction. If the income on the investment is paid to an Australian taxpayer, it should be declared and taxed in Australia.

However, if the investor is foreign domiciled, as many of the investors in EAI were, then there is no Australian tax payable. Presumably the investors, which included a Hong Kong fund and a UK fund, were liable for tax in their countries, though many of the investors themselves were structured using tax havens.

Companies using tax havens also often use a variety of methods to lower the tax bills of the Australian company which is earning income from the activity, whether it is mining, agriculture or selling running shoes.

Commonly used measures include inter-company loans with high interest rates that reduce pre-tax earnings, marketing fees payable to the offshore entity by the Australian company and other forms of transfer pricing.

The Australian Taxation Office has clamped down on these as part of its anti-avoidance campaigns in recent years.

The 2017-18 EAA accounts show the Australian company had a $30m loan from the parent company, EAI, that was repaid in August 2017 after the water buyback earned the company $52m profit, however there is nothing to suggest it engaged in tax minimisation practices.

Its tax affairs were complex because the company had deferred tax losses due to losses made prior to the windfall of the water buyback.

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For more on this story and to donate go to: https://www.theguardian.com/australia-news/2019/may/02/angus-taylor-says-he-did-not-set-up-caymans-structure-on-80m-water-buyback

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