By Eryk Bagshaw and Colin Kruger from the Sydney Morning Herald

Labor approved a $1.7 billion foreign takeover of Australia’s largest private hospital operator, Healthscope, by two Cayman Islands-linked companies when it was last in power, including one that had just been served with a $620 million tax bill by the Tax Office.

Opposition leader Bill Shorten accused foreign companies of using Australia as a “door-mat” for tax havens on Tuesday, escalating earlier queries to a fresh $4.4 billion takeover bid for Healthscope by Cayman Islands-linked asset giant Brookfield and implying multinationals of ripping funding away from schools and healthcare.

“I don’t think the Australian people want to see multinationals treating Australian tax laws as a doormat, wiping their feet as they head off to the Cayman Islands, especially with Australian health assets,” he said.

But Mr Shorten’s concerns are in stark contrast with the actions of the former Labor government which approved a Carlyle Group and TPG Capital takeover of Healthscope in 2010.Advertisement

The company owns the Northern Beaches Hospital and Prince of Wales Private in NSW and Victoria’s Melbourne Private and Knox Private.

Documents seen by The Sydney Morning Heraldand The Age show the Labor government, led by then treasurer Wayne Swan advised it had “no objection” to the deal despite the Tax Office having started its – ultimately fruitless – pursuit of TPG Capital for $620 million 10-months earlier over its share of float of department store chain Myer. TPG had transferred the gains to Luxembourg and the Cayman Islands.

Mr Shorten became assistant treasurer the day the Foreign Investment Review Board (FIRB) approval was received but as a backbencher up until that point was unlikely to have had any prior role in the process.

Tuesday’s sharp intervention from the Labor leader has raised business concerns that the more aggressive foreign investment stance could block looming deals if it wins on May 18.

Japanese giant Nippon has set its sights on a $4.2 billion deal with iconic Australian paint brand Dulux and TPG telecom is close to finalising a deal with the Cayman Islands-based Vodafone Hutchison Australia.

It the TPG deal gains approval from the competition regulator – due on Thursday – then a FIRB recommendation on the deal would be due early in the term of the next government, following the May 18 election.

Shadow treasurer Chris Bowen declined to say whether he would approve the other multi-billion dollar deals, but said if elected as Treasurer he would “consider the tax treatment of the investor”.

“Does the investor engage in multinational tax avoidance? Well it is very clear that the investor in this case [Brookfield] does operate through the Cayman Islands,” he said.

“I would certainly as Treasurer be asking the questions about the tax changes. If an asset was being transferred from an Australian company to one which involves tax minimisation through tax havens I’d be very concerned about it,” he said. “I would be asking why I should approve it?”

Tax experts argue the widespread use of tax minimisation techniques poses a challenge for Labor, with thousands of large companies legally linked directly or indirectly to low-tax destinations.

If an asset was being transferred from an Australian company to one which involves tax minimisation through tax havens I’d be very concerned about itChris Bowen

Simon Mordant, co-chairman of corporate advisory firm Luminis Partners, said there had been concern from foreign investors that the process has been opaque and uncertain.

“Whoever is in government it’s important that foreign investors have an understanding of what the ground rules are,” he said.

The Future Fund has six entities incorporate in the Cayman Island and Bermuda, according to its annual report, while an AustralianSuper spokesman confirmed “a small number of AustralianSuper’s investments in global pooled entities” were located in low or no tax countries.

“Consistent with our approach to Australian investments, when investing globally, we apply the same approach to tax governance regarding compliance with both Australian and international tax laws,” he said.

Wilson Asset Management founder Geoff Wilson said Australia had always relied on foreign capital to fund its growth.

“It appears illogical that the Labor Party, on one hand, are looking at restricting foreign investment in Australia, and on the other hand, changing the rules on franking that will encourage Australian companies and investors to invest their money overseas,” he said.

Mr Bowen said Labor would adopt a mix of policies to handle multinational tax avoidance after announcing a $640 million crackdown on Sunday targeting diverted royalties from multinationals such as Facebook and Google.

Labor’s election pitch has centred on redistributing company profits and taxes to increase services. The Coalition has argued slowing economic growth will be stunted by more than $200 billion in taxes under Labor.

“When Labor spends more, they tax you more and when Labor taxes you more they weaken the economy,” said Treasurer Josh Frydenberg, who declined to comment Labor’s foreign investment position.

Mr Bowen said he recognised tax reform was complicated but necessary to level the playing field.

“We recognise that not one policy will fix all the problems. We recognise that a whole range of policy armoury needs to be used,” he said.  “Companies that are paying their tax rate in Australia are at a disadvantage compared to multinationals.”

Healthscope investors will vote to approve the deal on May 22, four days after the federal election.

For more on this story go to; https://www.smh.com.au/federal-election-2019/labor-backed-1-7b-hospital-deal-with-tax-haven-link-20190507-p51kwi.html