Something is rotten in the state of Denmark.
Hamlet, Act 1, Scene IV
Fie! A pox on those wretched Danes. Tis a vile and scurrilous claim that our princely Macquarie Bankers have robbed the Danish state of 500 million kroner in unpaid taxes.
The time is out of joint; O cursed spite! That ever I was born to set it right!
This very week, Danish scribes and opposition politicians have conspired against our antipodean heroes with these rank and roguish attestations of tax evasion over Our Macquarie’s stake in Copenhagen Airport. Venomed knaves!
Do they not appreciate the wonders of structured finance? What of the beauties of our financial wizardry, of a stake within a stake, a vehicle within a vehicle? A play within a play no less!
Do they yet spurn the delights of a double tax treaty?
Are they not spellbound by the elegance of an exquisitely structured convertible security, neither quite debt nor quite equity, which delivers great rivers of cash from a fund in Denmark to sunny Bermuda via a convertible note struck in the polity of Luxembourg? Churlish cullions! They are a thankless lot.
Princess Mary of Denmark must act immediately to dissolve the opposition. Once more to the breach, dear friends! Close up the gap with our Danish dead. Salvage the honour of our swashbuckling financial pioneers.
More matter with less art, fair readers!
To things closer to home and the accounts for Sydney Airport, now merely one-fifth owned by Macquarie, show that once again zero tax has been paid. You don’t pay taxes if you make losses. And so it is structured, year in and year out, to make a loss. The trick, you see, is to run such high debt levels that every cent is soaked up in interest payments so that there is no profit from which to pay any tax.
So Sydney Airport has not paid much tax since the government sold it to the bank in 2002. Billions have gone Macquarie’s way in interest and fees while taxpayers have yet to see a return from this privatisation, at least in tax revenues.
It is a beautiful thing for the owners, the Macquarie princelings at their scintillating best – even now with no formal role as operator at Kingsford Smith they are still ripping out $10 million fees for “advisory services”.
Surely, the bank paid a handsome price when it bought the airport. With its flair for financial engineering and keen cost management the consortium won back its $6 billion investment by 2006.
Now, for the year to last December, Sydney Airport Corporation (SACL) has declared revenues of $943 million for earnings before interest tax depreciation and amortisation of $773 million. About $6 billion in gross debt ensured there was no profit. In fact, there was a net loss of $131 million.
Total finance costs were bang on $700 million for the year and, presto, SACL jagged a $30 million tax credit. Meanwhile, the NSW Office of State Revenue is chasing SACL, according to the note on contingent liabilities, for a $260 million chunk of stamp duty – but guess who is funding the airport’s defence? Spot on. The commonwealth – an indemnity for lawsuits no doubt.
And befooling the taxman yet again there is a loan from one Mac-inspired entity, SCACH, to another Mac-inspired entity, SCAC, repayable on June 30, 2048. The interest rate on this loan is 18 per cent,
the sort of second mortgage rate Phil Sullivan’s City Pacific was charging dodgy Gold Coast property developers on the cusp of insolvency.
The point being 18 per cent is ludicrous and plainly engineered so Sydney Airport pays no tax.
It is a tale of two regulators: one, Graeme Samuel of the Australian Competition and Consumer Commission, the other, the chairman of the Australian Securities and Investments Commission, Tony D’Aloisio.
When Samuel became chairman of the competition watchdog in July 2003 he put his private investments into a blind trust, which was managed by independent trustees. Last year it emerged that one of his family’s largest investments, a one-quarter interest in the discount shopping chain DFO, was in big trouble. This was the bastion of his ample personal wealth.
When things turned foul for DFO, Samuel’s partners David Goldberger and David Wieland went after the competition chief for one-third of any losses sustained by DFO. They claimed Samuel had provided them with an indemnity to cover losses, and the matter is now before the Supreme Court of Victoria.
In January Goldberger and Wieland joined Samuel defending the action taken by DFO’s lenders. With Samuel chasing another term as chairman of the ACCC – and having made powerful enemies pursuing the cardboard box magnate Dick Pratt for price fixing – his personal business activities have had plenty of scrutiny.
At least Samuel had set up a blind trust. It emerged this week in the Herald that D’Aloisio and his wife had acquired Oakridge winery in the Yarra Valley from the receivers of Evans & Tate. The administrators Ferrier Hodgson had been granted a special waiver from reporting financial accounts when the thing went belly-up. Moreover the company’s accounts had gone missing.
Creditors and shareholders then were in the dark. There is no allegation of impropriety here, merely the issue of whether the chairman of the corporate regulator should be personally buying assets from the insolvency people regulated by ASIC and, for that matter, from companies in distress.