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The taxation of foreign investment in Australia by sovereign wealth funds: why has Australia not passed laws enshrining the doctrine of sovereign immunity?
Citation
McLaren, J, The taxation of foreign investment in Australia by sovereign wealth funds: why has Australia not passed laws enshrining the doctrine of sovereign immunity?, Journal of Australian Taxation, 17, (1) pp. 53-84. ISSN 1440-0405 (2015) [Refereed Article]
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Copyright Statement
Copyright 2015 Journal of Australian Taxation
Official URL: https://www.jausttax.com/volume-17-issue-1
Abstract
The doctrine of sovereign immunity as it is applied in taxation
law allows for foreign governments to be exempt from income tax
on their passive investments, as opposed to direct foreign
investments (‘FDI’) in a number of jurisdictions. The US, for
example, has legislated for the recognition of sovereign immunity
in relation to withholding taxes on foreign investments by foreign
governments and sovereign wealth funds (‘SWFs’). However,
Australia has not passed similar laws enshrining this exemption
for SWFs or State Owned Enterprises (‘SOEs’). The Australian
Treasury and other interest groups have advocated the need to
have similar laws enacted in Australia in order to compete for
foreign investment and to formalise the law. Simply requiring
SWFs and SOEs to apply for a private ruling from the Australian
Taxation Office is not sufficient when other countries have
enshrined this immunity in their domestic law. Private rulings
only apply to the particular taxpayer and are only granted for a
limited number of financial years. However, with the growth in
foreign investment by China and in particular through SOEs
predominantly in mining and agricultural land, it would appear
that the Australian government is reluctant to formalise the
taxation exemption for political reasons. The issue of Chinese investment in mining and agricultural land has been politicised
by various sides of politics in Australia and appears to be of great
public concern. The paper will examine the doctrine of sovereign
immunity in relation to taxation and then discuss the current
situation with foreign investment by China through SOEs and
other government sovereign funds. The paper will then assess the
merits of formally granting the sovereign immunity from taxation
for SWFs and Chinese SOEs and the likely political repercussions
in Australia. The main thrust of the paper is that the political
considerations appear to have dominated this area of taxation
law and that the lack of formal recognition of the immunity from
taxation is threatening the future of foreign investment in
Australia.
Item Details
Item Type: | Refereed Article |
---|---|
Keywords: | Sovereign wealth funds |
Research Division: | Law and Legal Studies |
Research Group: | Commercial law |
Research Field: | Taxation law |
Objective Division: | Law, Politics and Community Services |
Objective Group: | Community services |
Objective Field: | Ability and disability |
UTAS Author: | McLaren, J (Dr John McLaren) |
ID Code: | 128593 |
Year Published: | 2015 |
Deposited By: | TSBE |
Deposited On: | 2018-10-01 |
Last Modified: | 2018-11-22 |
Downloads: | 1 View Download Statistics |
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