“It is
well understood and agreed that water in the Murray-Darling Basin has been
overallocated and extracted at rates that are unsustainable.” [The
Australia Institute, February 2018]
"Kia
Ora" reportedly totals 18,841 hectares and has water entitlements of 36,705 megalitres, while "Clyde" is said to total 18,743 hectares with water entitlements of 30,289 megalitres.
EAA also
appears to hold Queensland water licences which allows it to harvest overland
flows/flood waters from both properties.
Questions have arisen with regard to the sale of some of this water.......
At various times prior to entering federal parliament in September 2013 Liberal MP for Hume and Australian Minister for Energy Angus Taylor was reportedly a co-founder
and director of Eastern Australia Irrigation, a director of and company
secretary for Eastern Australia Agriculture and was also a paid consultant for EAA.
Ghost Water – licences for unreliable/unverifiable amounts of temporary water sold
to government for use as environmental flow water.
Overland flow is “water that runs across the land after
rainfall, either before it enters a watercourse, after it leaves a watercourse
as floodwater, or after it rises to the surface naturally from underground…..You
can take overland flow for any purpose unless there is a moratorium notice or a
water plan that limits what can be taken.” [Qld Government, Business
Queensland. January 2019]
Applications
can be made for a water licence for the capture of overland flow water.
“A
water licence is an entitlement to take water which is attached to land
therefore, unlike a water allocation, it is not an asset in its own right.
Water licences cannot normally be sold independent of land unless there are
management rules in place which allow permanent transfers (relocations) to
occur…..The relocation of a water licence enables a licensee to transfer
ownership of the entitlement, permanently moving the licence from the land to
which it is attached, to another parcel of land within the confines of the
rules. This process differs from permanent water allocation trading whereby
water allocations are traded independently of land titles and have their own
registrable title (i.e. water can be held by someone who does not own land).” [Qld Government,
Business Queensland. February
2019]
At the time of the water sales EAA has 7 harvesting licences, of which 4 were for water extraction from the Balonne and Narran rivers, 2 were for collection of overland flow waters and 1 was for irrigation water draw on the Beardmore Dam.
Unsolicited offer by EAA to sell overflow water at
https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22publications%2Ftabledpapers%2F59682649-2fa2-43b1-955f-ae16caecef45%22.
Austender records of three EAA water sales to the Dept. of Agriculture and Water Resources - the first by transparent open tender and the remaining to by non-transparent limited tender:
At the time of the first water sale (1,980ML at est. $2,175 per megalitre) Barnaby Joyce was an elected senator on the Opposition benchs and Labor's Tony Burke was federal water minister, at the time of the second and third sales (totalling 27,960ML at $2,745
per megalitre) Joyce was the Australian Deputy Prime Minister as well as Minister for Agriculture and Water Resources.
The first sale under the Labour Government was a result of an open competitive tender, the second and third sales were by unadvertised limited tender which excluded a competitive tender process.
NOTE: In 2008 it appears that EAA sold 10,433ML from its water storage to the Murray-Darling Basin Commission for an unknown amount.
The Australia Institute, March 2018, "That's not how you haggle....Commonwealth water purchasing in the Condamine Balonne", excerpt:
EAAs original asking
price was $2,200 per megalitre. DAWR displayed Pythonesque haggling skills and
paid a final price of $2,745 per megalitre. DAWR paid 25% more per megalitre
than originally requested by EAA, 139% higher than the Commonwealth had previously
paid for the same type of licence and 85% higher than the average price for a
more reliable type of water licence. The megalitre price was inflated because
it included the cost of a storage that the vendor originally offered to
transfer to the Commonwealth, but that offer was later withdrawn, without
adjusting the price. The storage was used as a justification of the sale, but
not as a condition of the sale.
The water purchased was
for Over Land Flow (OLF) licences, which cannot be traded between irrigators,
because they are attached to land. They have no legal status or any recognition
at a location other than where they were originally purchased. That is, there
appears to be no legal basis for the Commonwealth to ensure it gets to the
places it is intended to be used.
First, tax havens siphon
taxable profits away from jurisdictions like Australia. This means either
increasing the tax burden on individuals and businesses, taking on more debt,
or cutting social services.
These shenanigans are
not always illegal. But what is legal is not always moral or economically
sound. Australia’s fiscal foundations are threatened by the erosion of the tax
base by tricky tax tactics.
Aggressive tax planning
can erode public confidence in the tax system itself. After all, one reason
most of us pay the taxes we owe is that we believe we live in a society where
our fellow citizens do the same.
A fascinating new
dataset released by the Australian Bureau of Statistics helps shed light on
this problem. Across multinational firms operating in Australia, the bureau
reports their operating profit and their taxable profit. What is unique about
these data is that they are reported for firms with majority owners in
different countries. So it is possible to compare across countries, and ask the
question: which nation’s firms have the biggest gap between operating profits
and taxable profits?
For the typical
Australian firm, the gap between operating profits and taxable profits is 30
percent. The figure is pretty similar for multinationals whose owners reside in
the United States (28.4 percent), United Kingdom (26.6 percent) and Japan (28.5
percent).
But for some nations,
it’s a different story. If you’re a Bermuda-owned multinational operating in
Australia, then on average the gap between operating profit and taxable profit
is 88 percent. If you’re a British Virgin Islands owned multinational, the
reduction is 92 percent.[3]
So if you start with ten
dollars of operating profit, then Australian firms report about seven dollars
of taxable profits. The same is true for American, British and Japanese-based
multinationals – ten dollars of operating profit produces seven dollars of
taxable profit.
But for firms based in
Bermuda or the Virgin Islands, and operating in Australia, ten dollars of
operating profit produces just one dollar of taxable profit. That’s a startling
difference……..
Second, tax havens are
the hiding ground.....
Gabriel Zucman, an
economist at University of California, Berkley, estimates that around
four-fifths of money in offshore bank accounts is there in breach of other
countries’ tax laws.[4] .......
A recent study in the
journal Nature Ecology and Evolution found there are even egregious
environmental vandals there too. Following the Panama Papers, the study
found seventy percent of fishing vessels implicated in illegal, unreported and
unregulated catches had been registered in Belize, Panama, or other tax havens
at some point. [5]
Third, tax havens
increase inequality. Offshore wealth held by Australians in tax havens was
approximately 6 per cent of GDP, according to Zucman’s work in 2013. In today’s
prices, that would mean over $100 billion in assets held offshore by wealthy
Australians. [6]..........
Cayman Islands corporate tax rates appears to be zero.
During December 2016,
the Tax Office required Eastern Australia Agriculture to enter into a
Settlement Deed to reduce the interest charged by EAI on convertible notes
issued by EAA.
The interest charges
were required to be reduced from June 2011 when Taylor was still a director of
EAI. The total amount of excessive interest charges was $14 million.
This from EAA’s 2016 annual
report:
“Forgiveness of interest
expense – parent entity
“Following a review by
the Australian Taxation Office (ATO), the company entered into a Settlement
Deed with the ATO on 9 December 2016 and the parent entity agreed to reduce the
interest rate on the convertible note from 12 per cent to an average interest
rate of 7.97 per cent effective from 29 June 2011, resulting in a forgiveness
of interest expense accrued in 2016 and prior years."
The higher the interest
rate charged by the parent, the more money flows from Australia to the
Caribbean. In the parlance of the tax fraternity, this practice of charging
excessive interest rates, in order to maximise the interest payments out of
Australia to a tax haven, is called “debt-loading”.
By 2016, Angus Taylor
was no longer a director of EAI. He had stepped down from the board of the
Cayman Islands company in 2013, the year he entered Parliament. He was a
director however when the financing arrangement was established.
London Stock Exchange, EF
Realisation Company Limited (EFR) Annual
Financial Report, released 22 January 2018, excerpt:
Compulsory Redemption
Mechanism
EF Realisation monetised
various portfolio assets between February and August 2017 which, in aggregate,
comprised approximately 24% of the NAV as at 30 September 2017. The total
net proceeds raised were approximately £4.36 million, made up of £4.26 million
in realised proceeds (including £0.1 million from a corporate action involving
the Company's holding in Energy Future Holdings) and £0.1 million of investment
income (net of expenses). The Company realised its investment in Menhaden
Capital plc in February 2017 which raised £1.2 million, equal to 2.3p per
Ordinary Share. EF Realisation sold a bond holding in Integradoro de Servicios
Petroleros Oro Negro SAPI de CV ("Oro Negro") which raised
approximately £0.5m, and it
received approximately £2.5 million from Eastern Australia Irrigation Limited
which had sold certain of its water entitlements to the Australian Government
and distributed a majority of the proceeds to its shareholders, including EF
Realisation. On 4 September 2017, the Company announced its intention to
implement the Company's first capital distribution, returning £3.0 million
to Shareholders of the approximately £4.36 million in total net proceeds; the
balance of the net proceeds from asset realisations was retained for working
capital purposes…..
All the other
investments in EF Realisation are unlisted and valued by the Directors at their
estimated realisation values and, with one exception, changes in these
valuations have been small. The
exception is an upgrade to the valuation of the Company's minority shareholding
in Eastern Australia Irrigation Limited following that company's sale of water
rights to the Australian Government authorities in August 2017 and the
expectations for the amount of proceeds that can now be realised from the sale
of its farms…..
Eastern Australia
Irrigation Limited ("EAI") is an Australian based company which owns
and operates two farms in Queensland, whose main crop is cotton, along with
various water extraction rights from the Murray Darling River Basin. During the
summer of 2017, Australian Government authorities approached EAI with an offer
to acquire some of its water entitlements. EAI was able to negotiate the price for the water
entitlements to the highest level ever paid, and in August 2017 it completed
the largest ever sale of water entitlements in the Murray Darling River Basin.
EF Realisation owns 9.6% of EAI's shares and, along with other holders,
supported the sale of the water rights. EAI used the majority of the sale
proceeds to return capital to its shareholders, and passed £2.5 million to EF
Realisation. This represented a gain on that part of the EAI holding of £0.34
million or 16.0%. We comment below on the plans to dispose of EAI's farms……
EAI was in the process of selling its farms prior to the
sale of water rights. Proceeds received for the sale of water rights were
attractive compared to the offers received in the farm sale process so the farm
sale process was suspended in order to complete negotiations with the
Australian Government authorities over the sale of water rights. EAI has
now resumed the farm sale process with the intention of using sale proceeds to
repay debt and redeem its shares.
Having sold some of the water rights, the effective size of the irrigable land
that can be used for cotton farming has been reduced by approximately one-third
and it is expected that this, and the decision to sell the farms separately
rather than as a package as last summer, will make the farms attractive to a
broader range of potential buyers. Cotton prices are supported by low crop
harvests in cotton growing regions outside Australia and, at the time of
writing, local rainfall on EAI's farms has prevented a return of drought
conditions. However, until binding bids are received for the farms, the timing
for EF Realisation to redeem or sell its shareholding in EAI and the proceeds
from such a redemption or sale are uncertain.
EF Realisation carries
its remaining investment in EAI at a conservative estimate of the proceeds that
would be received assuming EAI's farms are sold and its shares are redeemed. In
particular, the implied valuation of the farms is less than the value of the
farms used to secure EAI's loan from the Commonwealth Bank of Australia, a
valuation point that has been a floor for proceeds in farm sales. [my yellow highlighting]
In the 2012-13 financial year Eastern Australia Agriculture Pty Limited
made a political
donation of $20,000 to the Liberal Party of Australia (NSW) and on 29
August 2013 the company made a second political
donation of $35,000.
After the September 2013 federal election Barnaby Joyce became the Minister for Agriculture and in September 2015 Water Resources was added to his ministerial portfolio.
