From The Australian, October 3, 2013
Note in the following article that The Hong Kong–based Cheung Kong group owns 51% of Citipower and Powercor in Victoria, corporations aggressively rolling out smart meters in the state. If billionaire owner LI Ka-shing and his group of companies go to the extent of actively evading their tax liabilities to Australia can they be trusted to be in control of Australia’s energy assets and do they really give a damn about their products harming the health of Victorians? Of course not. Its all about maximizing foreign control and profits over Australia’s energy assets. So much for the claim that privatization promotes competition and lower prices.
ATO in brawl with Asian billionaire Li Ka-shing
THE Australian Taxation Office is taking on Asia’s richest man over profits made in the nation’s power, gas and water industries, seeking $776 million in unpaid tax and penalties in one of the biggest fights it has launched.
The Australian has learned that the ATO is targeting companies controlled by Hong Kong billionaire Li Ka-shing, the chairman of the property, telecommunications, utilities and ports giant Cheung Kong Holdings, who is valued by Forbes at $US31 billion ($33.3bn).
The tax office recently scored a victory in the Federal Court against two Cheung Kong-related companies – Cheung Kong Infrastructure Holdings, the largest listed infrastructure company in Hong Kong, and its energy subsidiary Power Asset Holdings.
Judge Michelle Gordon ruled in favour of the tax office in the sum of $396m against Power Asset Holdings and $380m against Cheung Kong Infrastructure. The amounts included unpaid income tax from 2000 to 2009, as well as penalties for not lodging documents and interest, which continues to accrue.
The companies’ failure to lodge an address for service of legal documents allowed the tax office to obtain the judgment without the court needing to hear further legal argument about the underlying issues in dispute. The companies, which have previously vowed to “vigorously defend” their position, did not lodge any other documents in the cases and have not appealed against the decision.
Documents obtained by The Australian reveal the Hong Kong companies stopped talking to the tax office in January, which means the tax office is likely to have to take further court action to have its debt repaid.
The amounts in these two cases surpass the fight over the proceeds of the stockmarket float of the Myer department store chain. The ATO claimed it missed its share of the profits made by private equity firm TPG when Myer listed on the Australian Securities Exchange in 2009. TPG, which moved the money overseas, insisted it had done nothing wrong. It is understood the tax office has not recovered the alleged tax debt, last calculated in 2012 at $739m.
Unlike TPG, the Hong Kong companies still have significant assets in Australia. Together the companies have made hundreds of millions of dollars from their power and gas investments in Australia, many of which were privatised state government utilities.
Mr Li’s son Victor Li is chairman of Cheung Kong Infrastructure, which holds a 39 per cent stake in Power Assets Holdings.
In South Australia, the companies own 50 per cent of SA Power Networks, the former state government electricity distribution network. In Victoria the companies own half of electricity providers Citipower and PowerCor. Cheung Kong Infrastructure has about 19 per cent of Envestra, Australia’s biggest distributor of natural gas. Cheung Kong Infrastructure is also a substantial holder in the listed Spark Infrastructure Group and has 49 per cent holding in AquaTower, which provides water to about 25,000 people in Victoria.
Hutchison Wampoa, which is also controlled by Li Ka-Shing, owns 50 per cent of Vodafone Australia, the nation’s third biggest mobile phone group, although these companies are not involved in the tax dispute.
Cheung Kong Infrastructure, Power Assets and Cheung Kong Holdings declined to respond to a request for comment yesterday.
Documents obtained by The Australian reveal that discussions had been taking place between the Hong Kong companies and the tax office since the tax bills were issued in 2011. The companies were seeking legal advice and believed they still had time to lodge objections to the tax bills. But there has been silence since January this year, prompting court action by the tax office.
In its “genuine steps statement” – a document designed to inform the court of efforts to resolve the matter – the tax office says that in both cases it has “repeatedly required” the companies to lodge any objections it wanted to make against the tax bills, and to pay the debt. Despite “various telephone conversations and exchanged correspondence in relation to securing the outstanding amount owed”, the matter was not resolved.
This led to the tax office to tell the companies in January that it would begin legal proceedings, and in documents lodged in June the tax office says “to date, there has been no further response received”. The tax office commenced proceedings in the Federal Court that month. When the Hong Kong companies failed to lodge documents providing an address for service of documents, as required by the court rules, the tax office asked the court for judgment in its favour without the need for further legal argument.
“Is Cheung Kong in default, and if so, should the court exercise its discretion and enter judgment for the (ATO) commissioner against Cheung Kong? The answer to both questions is yes,” Justice Gordon said in a recent ruling.
Similar orders were made against Power Assets Holdings. “The entering of judgment in default against a party for non-compliance with orders is a step of the utmost seriousness,” Justice Gordon said.
According to Cheung Kong Infrastructure’s latest annual report, its Australian investments perform very well for the company. “The profit contribution from the group’s Australian portfolio was $HK1146 million ($158m),” the report states. The previous year the company enjoyed a profit contribution of $HK1306m.