Australian Panel Urges Government To Drop Farm/Forest Tax Break Scheme First Published Tuesday, 24 August 2010 09:00 am - � 2010 Dow Jones
CANBERRA -(Dow Jones)- A parliamentary panel Tuesday urged a future Australian government to reconsider tax breaks available in Managed Investment Schemes, particularly in forestry investment in the wake of the collapse of two major forest companies.
"Tax breaks for forestry are undesirable when there is a looming woodchip glut, and there has never been a reason to provide these incentives for growing horticultural products or beef," according to the final report of the Senate Select Committee on Agriculture and Related Industries.
The effect of MIS, which includes a 100% upfront tax break, is to distort investment decisions to the detriment of traditional farmers in these industries and those competing for the same land and water resources, the report said.
The committee's report was published after Saturday's general election. Two seats in the near-deadlocked election still haven't been decided, leaving Australians and investors waiting on a vote count that could take 10 days or more to finalize and a government that mightn't be formed for weeks.
Any government that is formed isn't bound by a report from such a committee, which was dominated by members of the opposition Liberal-National coalition, which set up MIS well before losing government in late 2007.
The report also comes well after the collapse in 2009 of two major MIS companies, namely Great Southern Ltd. (GTP.AU) and Timbercorp. Ltd. (TIM.AU). Timbercorp invested more than A$2 billion in agribusiness projects on behalf of 18,500 investors since 1992.
The Senate Committee found the allocation of resources to agricultural activity should always be guided by price signals and profitability, rather than by personal tax incentives.
MIS have a tendency to develop a ponzi-like character, where new capital becomes constantly required to prop up previous projects' underperformance. This undermines the reputation of agriculture as a sound investment and devastates communities that have become dependent on their existence, the report said.
The committee was set up to investigate food production in Australia in relation to consumer affordability, viability of production and environmental impacts. It urged governments around the world, including Australia's, to plan for the food needs of the population into the long-term future and that such planning should begin in earnest now.
By Ray Brindal, Dow Jones Newswires; 612 62080902; [email protected]
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