THE Federal Senate has released an interim report from its inquiry into the Foreign Investment Review Board’s (FIRB) national interest test, raising “serious concerns” about potential, “massive” revenue leakages, under the current legislative framework for foreign investments. Inquiry Chairman and NSW Liberal Senator Bill Heffernan said he was concerned that serious loopholes in local taxation laws were being exploited by major multinational companies, not just agricultural ones. Senator Heffernan said giant global internet company Google had about a $1 billion turnover in Australia but paid no taxes. He said the company’s revenue was generated here but was then returned to its US headquarters, via Ireland and “somewhere else and somewhere else”. “We’ve learnt in evidence there’s about $3 trillion in tax avoided globally because of the incapacity of countries, not just Australia, to audit transfer pricing and that becomes part of the business plan of the companies doing it,” he said. Senator Heffernan said he didn’t know what Australia’s share was of that $3 trillion in global tax avoidance - but understood the US’s share was $600 to $800 billion. “The world has to deal with this issue, not just Australia, because the multinationals will just chase the lowest tax base they can, to increase their profits, and governments like ours can’t keep up with the cash,” he said. Senator Heffernan said legislators needed to consider new and tighter regulations around foreign investment, which covered current loopholes to ensure Australia’s revenue base was protected, to match the changing global landscape. In releasing its interim report last week, the Senate Rural, Regional Affairs and Transport Reference Committee made six key recommendations addressing its major concerns. The first urged the Federal government to undertake an extensive review of tax arrangements that apply to foreign investors in agriculture, to prevent tax revenue leakage and market distortions. Another urged a review of current tax laws to improve incentives for Australian investment in agriculture to ensure they’re not at a comparative disadvantage to foreign entities. Senator Heffernan said the inquiry heard evidence that hundreds of millions of dollars of Commonwealth revenue was being potentially lost through the current vagaries of present tax laws, coupled with the inadequacy of an out of date Foreign Acquisitions &amp; Takeovers Act 1975. He said the Senate Committee wanted to release an interim report now to help raise the issues of concern, for legislators to consider finding solutions. “With every day that goes past, there’s more evidence of loopholes and revenue leakages,” he said. Senator Heffernan said he was concerned that foreign investors were buying up Australian agricultural land and assets in preparation for future food security issues, while Australia had a non-strategic approach to the industry’s future. He said with global population forecast to reach 9 billion by 2050 and 12 billion by 2070, countries like China will need to feed half their population base, using agricultural resources from other countries, like Australia. But they may produce food commodities here and then export supplies back to their homeland while bypassing local markets and the economy. That would remove competitive tensions from local markets and by declaring the production for humanitarian purposes, avoid taxation laws which would erode the nation’s revenue base – in particular for regional economies. He said foreign investors were also getting tax concessions and interest free loans while competing against Australian companies that were subject to higher costs and regulations. “They are looking for an outcome, rather than an income,” he said. “If you want a viable agricultural industry, you need foreign capital there’s no doubt about that. “But the production and money must be retained locally so foreign investors can’t distort or bypass our markets. “It’s like the recent announcement in WA where a Chinese company has come in and purchased wheat farmers and wants to bypass the market back to the home land - it’s a distortion of the local market that avoids local taxes. “We don’t know the true extent of what’s happening now because we really have no idea what’s going on. “The tax office has already said in evidence they don’t really know how to deal with sovereign investors because it’s a new phenomenon. “If this revenue leakage accelerates and we don’t get it under control and improve the regulations and look beyond the next election cycle – it will redefine sovereignty and sovereign risk. “Sovereignty is not only the defence of your nation’s borders but also defence of the nation’s revenue base.” Senator Heffernan said the Foreign Takeovers Act was out of date and “ridiculous”. He said it contained double standards by still describing urban land as anything that’s not farming or agricultural land, like the Simpson Desert. The interim report also recommended reviewing Australia’s tax laws which provide tax exemptions for ‘not-for-profit’ activities for foreign entities. It also called for a requirement that any ‘non-commercial’ production from agricultural land and businesses by foreign government entities be undertaken within relevant Australian government foreign aid programmes. Another was for more rigorous tax liability arrangements for both Government owned and private foreign entities so as to avoid possible loopholes that are not available to domestic competitors. The committee recommended the Foreign Takeovers Act be reviewed to specifically consider: the definition of 'rural land' and 'urban land'; drawing a distinction between the treatment of rural land and agricultural business; and any part of the Act that place limitations, either explicitly or implicitly, on the FIRB’s ability to effectively review the level and nature of foreign investment activities in Australia. An addition to the interim report from Independent SA Senator Nick Xenophon raised concerns about creeping acquisitions of foreign land purchases that fall under the FIRB $244 million threshold. He said they must be examined by the FIRB in order for accurate information regarding the level of foreign investment in Australian agricultural land to be maintained. Senator Xenophon said anomalies in the Act also need to be rectified “as a matter of urgency by way of introducing contemporary and relevant definitions of urban, rural and particularly agricultural land”.