Thin Capitalisation Change Could Discourage Investment

By admin - April 21, 2016

Pitcher Partners’ Leon Mok today expressed concern that leaked information about changes to thin capitalisation rules could discourage foreign investors.

“The proposed lowering of the thin capitalisation safe harbour threshold from 60 per cent to 50 per cent is coming less than two years after the threshold was last reduced,” said Leon Mok, Partner at Pitcher Partners.

“If you’re going to potentially compromise foreign investment by fiddling with thin capitalisation rules, there needs to be serious consideration given to a cut in the corporate tax rate to balance out the effects on businesses that rely heavily on debt finance.

“Ruling out meaningful tax reform in this election cycle has only left the ability to tinker at the edges by pushing politically safe tax topics, like superannuation for high net worth individuals and a crackdown on multinational tax avoidance.

“This is a politically expedient play, both in terms of budget revenue raising and in terms of being seen to be doing something about multinational tax avoidance. 

“As Australia rebalances away from the mining boom, the last thing we want to be doing is sending mixed messages to foreign investors.

“Foreign investors who have made long term investments in Australia should feel justifiably aggrieved that the rules dictating how they can finance their investments here may be changing again so soon after the last change.

“Ultimately, any discouragement of foreign investment will have impacts on local jobs and economic growth well beyond the next electoral cycle.”

For further information and comment please contact:

Leon Mok, Partner, Pitcher Partners WA, 08 9322 2022
Sabine Wolff, Media and Communications Advisor, Pitcher Partners, 0419 529 577

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