The Gillard Government's commitment to attracting more foreign investment received another boost today following the release of an options paper discussing the tax treatment of sovereign investments.
In releasing the options paper, Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, said "Sovereign investments in Australia, that is, funds from foreign government investment bodies, like our own Future Fund, currently make up about $65 billion."
"By exempting those investments that are generally of a passive nature from income tax, which is standard practice around much of the world, as well as reducing compliance costs and increasing certainty, we position Australia as an attractive destination for more sovereign investment in the future."
Countries that have arrangements in place to provide tax exemptions for certain foreign government investments include the United States, Canada, France, Japan, UK and Belgium. Australia also has treaty arrangements in place with several other countries that provide exemptions for certain foreign government investments, including Italy, South Korea, New Zealand and Norway.
"This is known in international law as the doctrine of sovereign immunity," he said.
"By codifying the current tax treatment of sovereign investment, which has developed historically, we can make sure sovereign immunity law is consistent with the Government's policy to tax inbound capital in a way that does not deter foreign investment."
"The discussion paper released today is the next instalment in what has been a valuable and robust consultation process. Participants should be pleased to see some of the refinements suggested in previous submissions reflected in the options presented in this paper', the Assistant Treasurer and Minister for Financial Services and Superannuation added.
"I invite interested parties to provide comments on the options proposed in this paper, so the Government can be fully informed of the community's views when it makes its final decision on the design of these rules. Written submissions are sought by 20 May 2011."
Submissions should be e-mailed to SovereignImmunity@treasury.gov.au or addressed to:
Unit Manager
International Tax Projects Unit
International Tax and Treaties Division
The Department of the Treasury
Langton Crescent
PARKES ACT 2600