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November 27, 2009

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US firm facing huge tax bill

AUSTRALIAN authorities have slapped United States private equity firm TPG with a bill for A$678 million (US$629 million) in taxes and penalties, a move that is sending chills down the spines of foreign investors.

The bill is linked to TPG's October 29 sale of its stake in Australian retailer Myer Holdings Ltd, from which the Fort Worth, Texas-based company made A$1.58 billion.

The Australian Taxation Office has accused TPG of skipping out on paying Australian taxes by funneling the money to companies in tax havens such as the Cayman Islands and Luxembourg.

TPG officials denied wrongdoing.

The private equity firm, one of the world's biggest, was part of a consortium that bought Myer in 2006. A little over three years later, TPG sold its stake through an initial public offering that returned the retailer to the stock market.

There are signs the tax dispute is having a chilling affect on private equity investors looking at Australia, largely because the use of companies in tax havens is common among private equity firms.


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