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AU Foreign firms fire at Wayne Swan's tax changes

Property Here - Thursday, May 16, 2013

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FOREIGN companies have angrily reacted to the government's changes to safe harbour tax status, saying it will "significantly reduce foreign business investment''.

The cut in tax deductions for interest payments made by the Australian subsidiary of foreign companies will make those businesses less profitable.

By its very nature, this move will then discourage foreign companies from establishing or maintaining operations in Australia.

Lead foreign advisory firm Grant Thornton said it would actively discourage its clients from investing in Australia.\

"While this change will be dressed up as an attempt to prohibit foreign companies artificially reducing their Australian tax liabilities, the fact remains that the knock-on effects of this change will have painful ramifications for Australian business generally,'' Vince Tropiano, tax partner at Grant Thornton Australia, said.

"The fact remains that the economy needs to supported both by government and foreign investment. This move does neither. These companies do not operate in a vacuum, so any other Australian company providing services to these companies risks losing customers.''

The government has also made it more difficult for miners to claim up-front tax deductions on exploration work carried out by another miner that has sold them the rights.

Foreign miners and other investors are also being targeted for not paying foreign resident capital gains tax, by taking 10 per cent of the sale proceeds from the purchaser of Australian property.

Other targets included banks shifting income offshore to reduce tax and sophisticated investors carrying out "dividend washing'', or repeatedly claiming tax benefits on dividend payouts.

Mr Swan denied that big business was a soft target to make budget savings, saying he supported an economy with strong demand, profitable businesses and jobs.

Those areas targeted were being abused, he said.

Treasury said the crackdown would save just more than $4 billion over four years, and ensure

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