FIRB is just one link in the foreign investment chain

By Peter Cai

The competition watchdog, taxation office and other regulators can still scrutinise foreign investors regardless of the foreign investment screening process.  The taxation office regularly takes foreign companies to court over transfer pricing issues as well as other tax avoidance problems.

If the government were to lift the investment threshold for Chinese state-owned enterprises, it could consider a US-style retrospective power for FIRB to unwind transactions if they were found to act against Australia’s national interest.

It is still unclear what Canberra is prepared to offer the Chinese in terms of an investment threshold for state-owned enterprises, which is by far one of the most contentious issues in the protracted negotiations that started more than a decade ago under the prime ministership of John Howard.

Let’s assume Canberra offers Beijing the $248 million investment threshold that applies to foreign private enterprises.

A better approach to strengthen Australia’s overall regulatory system would be to provide the tax office, securities regulator and competition watchdog with more resources to exercise proper oversight over foreign investors.

The current policy dictates that foreign state-owned enterprises and sovereign wealth funds need to submit their investment proposals to FIRB for vetting regardless of the values of their proposals.

The fear is if Canberra lifts the investment threshold for state-owned enterprises, many of them could invest in Australia without the necessary oversight, which could present a threat to the country’s national interest.

Canberra can afford to lift the investment threshold without compromising the overall integrity of the foreign investment regulatory system.

This means private Chinese enterprises are exempted from submitting their proposals below $1bn to the Foreign Investment Review Board.

Read more here: Business Spectator


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