THE Federal Government has forgone more than $6 billion in tax revenue to prop up managed investment schemes that are failing to deliver.

MIS was the tool the former Coalition Government launched in 1997 to treble the nation's "plantation estate" to offset a massive trade deficit in wood and paper products.

Vast tracts of land were planted to blue gums. But the Government failed to audit these projects or ensure they were backed by decent business plans.

Plans to develop pulp mills at Dartmoor, Penola and Tamar remained on the drawing board and wood chip yields fell well below expectations.

There was a failure by MIS supporters, such as former Forestry Minister Wilson Tuckey, to recognise they were creating a subsidised product that could not survive on its own.

MIS projects were not driven by demand for wood chips but the greed of high income earners who would rather gamble their taxes in the MIS sector than pour it into the public purse.

The Australian Taxation Office simply ticked off on product rulings that allowed Timbercorp and Great Southern to charge establishment fees of $9000/ha.

Yet long-established timber companies quoted the cost at $1700 to $3000/ha.

In 2006 The Weekly Times asked the ATO why it allowed MIS operators to charge these high fees.

The ATO argued the fees were based on commercial figures and in the end it was up to the investor. The argument failed to recognise the real losers were Australian taxpayers, who were subsidising these inflated establishment fees.

Now the MIS sector is struggling to deliver a decent return to shareholders.

But it's not just the shareholders and investors who are the losers, it's Australian taxpayers who have lost tax revenue that could have been spent on roads, education, health or agricultural research.

Two of the nation's largest MIS operators, Timbercorp and Great Southern, are now trying to transform themselves.

It is an act of desperation by these companies to maintain some cash flow.

As both companies report: the failure to transform threatens their futures as "going concerns".

Oh, and by the way, Australia still has a massive $2 billion trade deficit in timber products, mainly high-value paper.