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BHP's Australian tax dispute grows

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BHP Billiton is locked in a $1 billion dispute with the Australian Taxation Office over the amount of taxes payable on the sale of Australian commodities to its Singapore marketing business.

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The ATO had previously assessed the company’s liabilities for FY2003 to FY2008 at $362 million, including interest and penalties, in relation to the transfer pricing dispute. It has now sought another $537 million for the period FY2009 to FY2013, the company has revealed.

In addition, BHP has received an assessment totalling $117 million relating to the computation of the Minerals Resource Rent Tax for FY2013, taking the total bill to $1.02 billion.

The company said in line with normal practice, it has made partial payments for 50 per cent of the primary tax due.

“BHP Billiton does not agree with the ATO’s position. Consequently, we have objected to all of the amended assessments and intend to continue to defend our position, including by initiating court action if necessary,” it said in its annual payments to government report.

BHP, along with other multinationals including Rio Tinto, Apple and Google, has been under investigation by the ATO over the use of Singapore-based marketing hubs to allegedly reduce their tax bills.

Chief financial officer Peter Beaven defended the use of a Singapore marketing hub, saying it was a legitimate, standalone business with a central location, and the company continues to pay its fair share of taxes.

“Asia accounts for 72 per cent of our revenue, so our marketing business for minerals is headquartered in Singapore,” he told reporters.

“Its a great location close to our customers, it has excellent local skills and, of course, it has an attractive tax rate.”

While BHP was subject to an average tax rate of 30.3 per cent in Australia, it paid zero tax on its marketing operations in Singapore.

The company said while the amount involved is significant, the primary tax in dispute represents less than two per cent of the taxes and royalties paid in Australia over the 11-year period.

The world’s top miner paid nearly 50 per cent less in taxes and other payments to governments around the world last financial year, as a prolonged downturn in commodities prices weighed on profitability.

BHP paid $US3.7 billion ($A4.9 billion) in taxes, royalties and other payments to governments in the countries it operates in during 2015/16, down from $US7.3 billion in the previous year, it has disclosed in the report.

“Our payments of taxes and royalties have decreased in FY2016 compared with prior years. This is reflective of lower profits due to lower prices,” Beaven said.

BHP suffered a record full year loss of $US6.39 billion after plummeting oil and iron ore prices and the Samarco mine disaster wreaked havoc with its bottom line. Its underlying profit for the year had also slumped 81 per cent to $US1.22 billion, as lower commodity prices stripped down margins.

The company said of the total payments, it paid nearly two thirds, or $US2.52 billion, in Australia alone.

Its global adjusted effective tax rate was 35.8 per cent in 2015/16, up from 31.8 per cent in the previous year.

The BHP report, released annually, comes amid an aggressive campaign by the mining industry against WA Nationals leader Brendon Grylls’ controversial plan to impose a new $5 a tonne mining tax on BHP and rival Rio Tinto to help balance the state’s revenue shortfall.

The miner last week said the plan put at risk its investment in a huge new iron ore mine in the state and would also cost jobs.

AAP

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