Packer sees off the Revenue men

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The Independent Online
AUSTRALIA'S RICHEST man, Kerry Packer, one of the founding members of the "Order of Mates" who rose to conquer world markets in the 1980s, has fought off an attempt by Australia's tax authorities to dip into his wealth.

Yesterday a Federal judge rejected claims that could have netted the public purse as much as A$250m (pounds 96m), leaving the media magnate with a bill for only A$25,000 for his companies. The effect of the ruling is that Mr Packer will end up paying as little as A$30 in personal taxes for a three-year period.

The latest attempts to make Mr Packer pay date from 1991, based on objections to accounts from his Consolidated Press Group after a failed takeover attempt for British American Tobacco (BAT). The tycoon told a parliamentary inquiry at the time that if anyone did not seek to minimise their tax liabilities, "they want their heads read".

His tax tactics were based on a complex web of companies, their names differing only by the odd couple of initials, which made sure any gains came in tax havens such as the Bahamas, and losses in relatively high tax regimes including Britain and Australia.

The country's super-rich became consummate shufflers of international capital during the 1980s, when the liberalising Labor government of Bob Hawke abandoned exchange controls. With the interest on loans to finance takeovers tax-deductible in Australia, Mr Packer prospered, with fellow businessmen, including Rupert Murdoch and Alan Bond, founding members of the so-called Mates.

In the case of BAT, Mr Packer joined forces with Sir James Goldsmith and Lord Rothschild to mount a A$28bn bid.

Their complex tactics were alleged by Australia's Taxation Commissioner to be "dividend stripping" - the purchase of stock in a dividend-rich company, the payment of those dividends, the subsequent sale of the shares for a loss and offsetting the loss against the dividend income. But Justice Graham Hill rejected these arguments. Thirty-five claims by the Australian Taxation Office were rapidly winnowed down to just eight by Mr Packer's lawyers, with the outstanding issues decided after just 10 days in court.

The authorities were said yesterday to be considering an appeal, which must be lodged within 21 days. Whatever the next moves, though, the spectacle will have heightened public resistance to taxation. "People say, `If Kerry Packer doesn't pay, why should I pay?'," Eva Cox, of the Women's Economic Think Tank, said yesterday.

At the time of the BAT takeover bid, most corporations in Australia were supposed to be turning over almost half their profits to the Treasury. But Mr Packer's Consolidated group paid just nine cents in the dollar. A couple of years earlier, a deregulation of commercial television as sudden as it was unexpected doubled the value of his media holdings. On another occasion, Mr Packer sold his flagship, Channel Nine, to Alan Bond for A$1bn, then, shortly afterwards, bought it back for half that.

Known as "The Goanna" for his alleged resemblance to the Australian lizard, Mr Packer is the second son of a former professional boxer. He elbowed aside his elder brother Clyde to take on the family business but health problems have forced him to consider the succession. Recently he underwent surgery in the United States to correct heart problems but that does not seem to have diminished his gargantuan appetite for deal-making.

Mr Packer's dynastic ambitions suffered a setback, however, when it emerged this week that his son James had split with his fiancee, just three months before they were due to wed. In compensation she will receive a pounds 3.5m settlement.

Mr Packer will now be concentrating on his long-held ambition to complete the takeover of the Fairfax Group, publishers of the Sydney Morning Herald. Present media ownership laws mean he cannot increase his 15 per cent stake, but since the election earlier this month the group has installed a new chairman, an academic free-market economist with no media experience - a development widely greeted as preparing it for the Packer era.

The billionaire loomed large at the campaign launch of John Howard, whose centre-right coalition was returned to power. Mr Packer's appearance prompted Lachlan Murdoch, custodian of his father's Australian press interests, to observe that media proprietors should not seek to influence elections.

While Mr Howard has been carefully non-committal on the prospects for deregulation of the kind Mr Packer is seeking, he did pledge himself yesterday to "whatever steps are necessary" to close tax avoidance loopholes estimated at up to A$9bn a year.