A PLAN to reduce tax breaks for rural managed investment schemes has provoked outcry from both sides of the MIS debate, with some warning it will stifle investment in agriculture and others saying it does not go far enough to stamp out "tax rorts" in the sector.
A parliamentary inquiry into the collapse of MIS promoters Timbercorp and Great Southern this week recommended the Federal Government consider ditching up-front tax deductions for agricultural schemes, but quarantine forestry schemes on the basis that they contributed to considerable economic growth in rural areas.
It also suggested that some form of prudential oversight of agribusiness schemes could help prevent major failures, saying MIS providers should be able to show that they had "sufficient working capital" without relying on sales of new schemes to remain viable.
The Greens attacked the plan to preserve tax breaks for forestry schemes, saying they inflated land prices and put pressure on scarce water resources. "People across regional Australia will be beside themselves over this disgraceful decision to continue the MIS tax rort," said Senator Christine Milne.
But accounting group CPA Australia said scrapping up-front tax deductions would be a "death knell" to many agricultural projects. The group's general manager of policy and research, Paul Drum, said the Government should consider its "next steps" on agribusiness MIS "in line with the broader policy objectives of Australian investment, markets and jobs".
Nationals senator John Williams argued the tax break gave an unfair advantage to investment schemes at the expense of other farmers. But he said the party would support tax breaks for schemes in developing areas, such as far north Queensland and the Northern Territory, and in struggling rural regions.
National Farmers' Federation vice-president, Charles Burke, reiterated that MIS forestry took out some of the best farm land and gave MIS companies an unfair advantage. "It does not make sound economic policy to provide an up-front tax deduction," he said.
The committee's report also called for better disclosure of the qualifications of experts used by MIS promoters to predict project yields.
Assistant Treasurer Nick Sherry, who has responsibility for tax matters, said the Government would wait for the Henry tax review recommendations at the end of the year.
Financial Services Minister Chris Bowen, who has responsibility for the Australian Securities and Investments Commission, said the Government would "carefully" consider a recommendation for ASIC to appoint a temporary responsible entity, rather than receivers, when schemes got into difficulty.
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