A little light over here, please
The thing that people who operate in dark places fear the most, is light.
Introduction
I would like to thank the contributors, witnesses, and committee secretariat for their support to and participation in this inquiry.
Firstly, I support foreign investment. It plays a significant element of the Australian economy and the country has by and large done quite well from such investment. But as its benefits are recognised it’s prudent to appreciate that there can be down sides to foreign investments, and indeed circumstances where foreign investment is unquestionably against the public interest. Foreign investment approval processes and ongoing activities associated with compliance needs to be undertaken carefully and thoughtfully.
I support the recommendations of the Committee but make additional remarks in relation to transparency associated with the scheme.
Publication of Applications and Approvals
There are many reasons for information to be kept confidential, especially during an acquisition process, however perpetual and unjustified confidentiality can erode public confidence in the implementation of the scheme and lead to adverse outcomes.
Foreign investment is infected with the secrecy bug, with the Act encapsulating protected information provisions, ensuring the information is hidden from the public, an environment that has been maintained by successive governments. Not only have they maintained it, officials have permitted and propagated abuse in a statutory arrangement that only properly protects information obtained from companies (no matter how benign the information is), but officials then say also extends to any information in relation to the acquisition.
Treasury could not explain why certain information could actually cause harm to the company or its interests and thus should not be disclosed, instead they refer to the Act, a self-sustaining circular argument.
Other jurisdictions publish information about foreign investment and there is no evidence that this has hindered investment in their countries. New Zealand’s approach to transparency of foreign investment, as covered in chapter 5 of the report, is a good example of what could and should be done in Australia.
Recommendation:
The Australian Government should amend the Foreign Acquisitions and Takeovers Act 1975 to enable publication of foreign investment applications and approvals, including relevant associated information.
Corporate structure
The saga of tax havens, profit shifting and transfer pricing continues, and whilst there is a global intention to resolve this, it is slow moving. If foreign investors were required to provide a clear explanation of the associated global structure and the role each entity performs in the delivery of the Australian entities output, their relevance in the movement of money would be clear. Such disclosure would assist the Australian Taxation Office in their efforts to counter inappropriate transactions.
This information is relevant if the investment proceeds, it has relevance to the ATO and will assist in raising public confidence and should be publicly available.
Recommendation:
The corporate structure of the foreign investor and the role of related foreign entities in the Australian entities output should be defined and be part of the investment application.
The corporate structure of the foreign investor as it pertains to the Australian operations, including the role of related foreign entities in the Australian entities output should be deemed relevant associated information and publicly available.
Open undertakings
Public wariness of and opposition to foreign investment will only be sated when the public can quantify the performance of the investor, and this will only be possible when they understand what was proposed and can determine if those claims have been, largely, satisfied.
The foreign entity will likely propose to do a range of things in relation to their investment, ‘voluntary undertakings’, and the Treasurer may impose certain conditions. Whilst the Treasury has advised these ‘voluntary undertakings’ are ancillary to the considerations, they shouldn’t be. They form a fundamental component of the investment, on top of which they provide some ability to measure performance.
Unfortunately these ‘voluntary undertakings’ are not properly monitored nor are they enforced, and the committee’s recommendation that these ‘voluntary undertakings’ become enforceable is a step in the right direction, but it stops short.
These undertakings were proposed by the company and should be made public, enabling the Australian population to better understand the basis for the investment going ahead and able to judge for themselves how compliant the foreign investor has been with what they proposed.
Recommendation:
Voluntary undertakings should be accepted as a self-imposed condition of the investment proposal, and thus be relevant associated information publicly disclosed. A little light over here, please. A little light over here, please.
Senator Rex Patrick
Member
Independent Senator for South Australia