Smoke and Mirrors: report finds Origin Energy’s suitor Brookfield an aggressive global tax dodger

by Callum Foote | Jun 6, 2023 | Finance & Tax, Latest Posts

A global analysis of Canadian financial engineering juggernaut Brookfield, which is close to wrapping its $20bn takeover of Australia’s Origin Energy, reveals a complex global structure and aggressive tax avoidance strategies, reports Callum Foote.

Brookfield is the most prolific of foreign takeover merchants in Australia. In recent years it has made successful takeover bids for Healthscope, whose hospitals are now controlled in the Cayman Islands, Aveo, whose nursing homes are now controlled in Bermuda, and electricity giant Ausnet.

During that time, its main vehicle in Australia, BPIH, has paid no corporate income tax. Brookfield is now bidding for Origin Energy. Competition regulator ACCC, months ago, promised it would hold a public inquiry into the Origin takeover. There is still no sign it, despite competition concerns about the effect of a combined Ausnet and Origin on electricity prices for Australian consumers.

Brookfield is not only an aggressive tax avoider in Australia – as documented by MWM over the past five years – but it is a prolific tax dodger on the global stage according to a new report by the Centre for International Corporate Tax Accountability & Research (CICTAR).

Brookfield is one of the world’s largest investment managers, specialising in direct ownership of companies around the world, across a range of diverse sectors, industries, and asset classes. It is a big player in renewable energy too. Its investments have clear and direct impacts on hundreds of millions of people. It has over US$800b in assets under management, much of which is workers’ deferred income from global public pension funds.

As of March this year, Brookfield announced the $18.7b purchase of Origin – made through a scheme of arrangement in conjunction with Mid-Ocean Energy, which will buy Origin’s LNG business – was sealed on the same day as the landmark Safeguard climate deal passed federal parliament.

Green dreams

Brookfield claims it will generate up to 14GW of new large-scale renewable and storage facilities in Australia – nearly as much as has been built in the whole of Australia over the last 10 years.

However, report author Jason Ward says that “Brookfield’s claims of being a responsible investor and advancing a sustainable green economy appear to be in serious doubt.”

This is, in part, is due to the giant’s track record in countries such as Colombia, with its 2016 purchase of the country’s largest state-owned electricity company, ISAGEN Energia Productiva.

Since acquiring the company, Brookfield has extracted almost US$1b from ISAGEN in dividends, as well as using shareholder loans and related party transactions to avoid an estimated US$850m in tax.

Included in Brookfield’s marquee assets deploying aggressive tax strategies is Canary Wharf in London and Manhattan West in New York, says Ward. It also owns a global lottery company that operates government-sponsored lotteries (and sports betting) in 50 countries and is “the largest lottery systems provider in Europe and the fastest growing in the U.S.

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Global structure, local impacts

In 2022, Brookfield Corporation reported global revenues of nearly US$93b. Due to opaque global reporting on operations at the country level, the proportion of Brookfield’s global revenues from exploiting loopholes in national and global tax systems is unclear. But the sheer opacity and proliferation of tax haven entities, although impossible to analyse with any precision, is cause for concern – not least because the rise in interest rates and the high debt leverage in its property investment assets is now causing concern among investors globally.

In Bermuda alone, a current search of the registrar of companies for entities beginning with “Brookfield” produces 266 results, including many like “Brookfield Australia Infrastructure Holdings (Brookfield AIV), L.P.” and “Brookfield Australia Infrastructure Holdings (Bermuda), L.P.”, which are clearly linked to investments in other countries.

In terms of revenue share, Australia is Brookfield’s sixth most important market, with revenues over US$6b in 2022.

Brookfield owns Healthscope – the second largest private hospital operator in Australia – which continues to be shrouded in controversy around its ownership structure and lack of tax payments.

Healthscope was acquired by Brookfield in 2019, at which time the opposition leader specifically referring to Brookfield’s bid, “accused foreign companies of using Australia as a ‘door-mat’ for tax havens” and implying that multinationals were “ripping funding away from schools and healthcare.”

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Show no profit, pay no tax

In the most recent (2020-21) corporate tax disclosure data from the Australian Taxation Office (ATO), the parent company of the Healthscope group, ANZ Hospitals Topco Pty Ltd (owned by Brookfield via the Cayman Islands), ranked 163rd of all companies in Australia in terms of total income, at $2,336m. It reported no taxable income and paid no tax.

Healthscope’s annual financial statements report $7,603m in revenue in the past three years. Over the same period, net profit totalled only $24.8m, while Healthscope claimed $46.1m in tax benefits.

The report’s author, Jason Ward, says:

This appears to be an ongoing pattern with Healthscope and several other prominent Brookfield-owned companies in Australia, and may further jeopardise its social licence to operate in one of the corporation’s key global markets.

BPIH, Brookfield’s primary Australian subsidiary, made MWM’s Top 40 Tax Dodgers list for 2022. Over the past eight years, BPIH has earned over $15.8 billion in Australia without making a single cent in taxable income.

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Australia wins plaudits for move on multinational tax dodgers but much more is needed on fossil front

Callum Foote was a reporter for Michael West Media for four years.

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