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Australian Government: Proposed Tax Changes to Provide Certainty to Sovereign Investments

Nick Sherry

According to the Government of Australia – Assistant Treasurer, “The Assistant Treasurer, Senator Nick Sherry, has today released a consultation paper on the proposed changes to the income tax law to formalise the existing tax practice of exempting certain income earned by foreign governments.

“Currently, there are around 50 sovereign wealth funds around the world with approximately US$3.8 trillion under management and it’s expected that this will rise to around US$10 trillion by 2015,” said the Assistant Treasurer.

“The Rudd Government wants to provide certainty to these funds when they’re considering investing in Australia, and this measure will greatly assist in delivering that outcome.”

“The proposed changes will make Australia a more attractive destination for sovereign investment and will also contribute to the Government’s financial hub strategy.”

The consultation paper seeks comments on the broad legislative design principles of the proposed changes, including:

  • the appropriate definition of a “foreign government”;
  • how non-commercial (passive) income should be defined to ensure that it can be easily distinguished from commercial (active) income, thereby securing a level playing field for competing Australian businesses;
  • what effect should the derivation of active income have on the tax treatment of an entity’s passive income; and
  • the range of taxes that should be captured under the sovereign immunity legislation.
  • “We are strongly committed to close consultation with industry on tax measures. We will undertake a further consultation on the draft legislation, which is expected to be introduced in the first half of 2010,” said the Assistant Treasurer.”

    read more: Government of Australia – Assistant Treasurer | Consultation Paper

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    NBIM is invested in many listed companies and have invited them to join a network to tackle these issues. Over the next two years, the organizations plan to hold three workshops as well as quarterly meetings surrounding these issues.

    “Over time, we hope and expect that the network will contribute to improved market practices among companies and greater respect for children’s rights,” says Carine Smith Ihenacho, Global Head of Ownership Strategies, in a NBIM press release.

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    SouthGobi’s CEO Arrested, CIC Struggles with Investment

    The China Investment Corporation (CIC) has long struggled with its investments in coal assets, specifically in globally-listed coal miner SouthGobi Resources Ltd, which operates its flagship coal mine in Mongolia. In November 2009, CIC and SouthGobi Resources inked a convertible debenture deal. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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    Qatar Central Bank Deals with MSCI

    MSCI, a stock index company whose benchmarks influence investor behavior, has tremendous indirect power impacting the stock markets of smaller economies. In 1988, MSCI released its emerging markets index, a now-widely-used benchmark for many institutional investors wanting access to growth markets. China and South Korea make up the majority of the benchmark, but smaller economies such as Poland, Chile and even Qatar make up other pieces of it.

    [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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