Monday, July 24, 2006

James Hardie Asbestos Compensation Fund

The Federal Government has allowed James Hardie a tax deduction for payments into the James Hardie Asbestos Compensation Fund.

I am not a lawyer, let alone a tax laywer. However, the payment of compensation seems to me to be something other than an ordinary tax-deductable business expense. The Federal Government has not, and is resisting calls for, tax-deductability on earnings of the Compensatin Fund.

My understanding is that the fund was not established as a charity, partly to ensure that James Hardie met its legal contributory obligations under the negotiated settlement. In any case, it is NOT a charitable fund and any tax on the fund's earnings does not excuse James Hardie from fulfillings its legal laibility to compensate victims of asbestos in its products.

I believe the Federal Government is right in denying tax-free status on the fund's income and this does not diminish James Hardie's obligation to its victims. IT clearly has such an obligation and not granting the fund tax-free status does not deny the victims access to to, or reduce James Hardie's obligations to, compensation. IF James Hardie claims it is unable to meet its legal commitments, then an application should be made to wind-up the company and distribute the proceeeds of its sale. It should not be trying to reduce its financial commitments to the victims by claiming both business tax deductions AND tax-free income from the fund.

The Analyst