Vic Treasurer Calls for Rethink on Taxing Global Forest Companies

Industry claims the new tax could lead to a major shortage in future timber supply

Thu 07 Dec 23


A crackdown on multinational tax avoidance could see international companies in the Australian supply chain for forest products hit with millions in new taxes, jeopardising timber supply and driving conversions of production forests to agriculture.

The Victorian Government, which will close the native hardwood industry in the state at the end of the month, have concerns the taxes could put the breaks on its $120m Gippsland Plantations Investment Program.

That program, the largest investment in new plantations in Victoria’s history, will see 16 million tree plantations and more than 14,000 hectares of newly established softwood plantations. 

The Herald Sun reports that HVP Plantations, which has matched the Victorian Government dollar for dollar in that investment, now faces a $10m tax hike as the Albanese Government looks to claw back $700 million from 2500 companies over the next two years.

HVP Plantations, owned by a combination of Australian, Canadian and US Pension Funds, manages more than 240,000 hectares of plantation forests in Victoria, supplying three million tonnes of softwood and 300,000 tonnes of hardwood to saw millers, panel producers and pulp and paper mills in Australia and overseas.

Just 4,000 of the 16 million trees in the new estate are now in the ground, with Victorian Treasurer Tim Pallas urging the Albanese Government to reconsider the tax hike.

“Future investment will be needed to meet our future needs,” the Victorian Treasurer said, with ABARES reporting that Australia’s softwood plantation estate is at its lowest level in over 20 years!

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Australia’s total plantation area continues to decline and is currently at its smallest area since 2003-04 due to the ongoing conversion of hardwood plantations to other land uses. (Photo Credit: ABARES)

The Bill, before Senate Estimates, aims to strengthen rules by reducing the company debt deduction limit. The problem for multinational companies in the forest industry is that the reforms would prevent companies from claiming any of their plantation debt costs.

The government has already added two new provisions to forestry establishment and preparation costs, which the Herald Sun reports has wiped $20 million of revenue from the measure.

However, Australian Forest Products Association acting CEO Natasa Silkman – representing the interests of the multinational companies invested in the industry – said the amendments still penalised plantation owners.

“We need expansion to ensure Australia has an adequate supply of sustainably sourced timber in the future,” Ms Silkman said.

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New plantation establishment increased slightly in 2021-22 but remains low. (Photo Credit: ABARES)

According to Dr Andrew Leigh, Assistant Minister for Treasury, the proposed changes recognised that some plantation species take up to 50 years to reach harvest age, meaning the industry had “unique timelines for investments to start earning”. 

“The Australian government expects all businesses to compete on a level playing field, and this involves multinationals paying their fair share of tax to help fund the vital services Australians rely on.”

The Albanese government has also committed $73m over four years to a plantation grants program to increase forest cover on farmland.

However, this is not enough, according to Shadow Foresty Minister Jono Duniam, who said: “The badly drafted bill was a kick in the guts to forestry workers who are still reeling from Dan Andrews’ devastating decision to ban native forestry”.


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