Companies

Nov 17, 2009

ATO-TPG fight may force legislators to act curb tax favours

The emerging stoush between the Australian Tax Office and the former private equity owners of Myer should warm the cockles of the hearts of every long-suffering Australian taxpayer.

Adam Schwab — Business director and commentator

Adam Schwab

Business director and commentator

The emerging stoush between the Australian Tax Office and the former private equity owners of Myer should warm the cockles of the hearts of every long-suffering Australian taxpayer. And while the ATO freeze and inquiry into TPG, and its partners Blum Capital and the Myer Family Office, may not yield many dividends, it may at least prompt legislators to act to restrict the abhorrently favourable tax treatment received by private equity and foreign businesses. (The ATO issued TPG with a $452 million tax assessment and an additional $226 million in penalties last week relating to proceeds from the float of Myer).

As this column has noted in the past, private equity investments make their money largely though two factors. First, they are able to utilise an efficiency arbitrage when acquiring public companies. That is, most public companies are poorly managed, inefficient and pay their managers high remuneration that is rarely linked to company performance. Second, they are (legally) able to pay virtually no tax on any profits they ultimately reap.

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1 comments

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One thought on “ATO-TPG fight may force legislators to act curb tax favours

  1. Greg Angelo

    You are asking a lot of the politicians to actually tax their mates rather than screwing us ordinary taxpayers. Ordinary taxpayers don’t make fat donations to political parties, as the big end of town does directly and indirectly. How many politicians cruise quietly from politics into a comfortable seat in business.

    There are many instances of lax law either incompetently or deliberately engineered to facilitate tax avoidance. Don’t hold your breath waiting for the politicians to do anything serious about this problem

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