BHP has released a new report which shows that most of their payments to governments worldwide are made to the Australian government.
The Economic Contribution and Payments to Governments Report 2015 stated that the Australian government received US$5.245 billion since the beginning of the year, representing 72 per cent of BHP’s total government expenditure of US$7.3 billion
More than US$1.93 billion of the government expenditure was accounted for in royalty payments for extracted resources.
BHP’s Australian operations include 13 separate project groups across 18 different government organisations, from federal to local tiers.
By comparison the United States government received only US$644.2 million for eight project groups across the US Federal government and five state governments.
BHP CFO Peter Beavan said the new taxation disclosure was released ahead of the company’s regulatory requirements, in the interest of transparency.
“The additional information we are providing builds on the annual tax and royalty payments information we have provided in our Sustainability Report for the last 15 years,” he said.
“We began to voluntarily disclose our tax and royalty payments in 2000 and since then we have progressively increased the detail in these disclosures,” he said.
“BHP Billiton is committed to the highest standards of corporate governance and we seek to encourage reforms that enhance disclosure and transparency around the world.
“This includes support for the creation of a globally-consistent mandatory disclosure framework with formal equivalency agreements between jurisdictions.”
Beaven said BHP’s total economic contribution last financial year was US$35.7 billion, which included US$7.3 billion in government expenditure, $16.1 billion in payments to suppliers, $4.9 billion on wages and employee benefits, $225 million in community contributions, and $7.2 billion in dividends to more than 600,000 shareholders and investors.
Australian communities received 42 per cent, or 94.5 million of BHP’s total community contributions in 2015.
The pre-regulatory transparency move has been received by some as a thinly veiled attempt to garner positive publicity while BHP is in dispute with the Australian Tax Office over a $522 million tax bill.
Earlier this year BHP came under the microscope at the Senate Inquiry into Corporate Tax Avoidance, with allegations the company had engaged in profit shifting practices through it’s Singapore-based ‘marketing hub’.
It was shown BHP had paid a tax rate of only 0.002 per cent on profits gained by selling iron ore to the Singapore subsidiary of BHP at less than market rates.
With negotiated tax incentives from the Singapore government, BHP paid US$121,000 in Singapore and $945 million in Australia on profits of $US5.6 billion between 2006 and 2014.
BHP has since claimed that it pays an average tax rate of 32.5 per cent in Australia and 31.8 per cent globally, compared to the OECD corporate tax rate of 25 per cent.
In an interview with ABC today, Beaven said the effectively-zero tax rate in Singapore was part of a concessional tax deal with the Singapore government, and that BHP was not avoiding paying tax in Australia.
"That is not an avoidance issue, that is a pricing issue," he said.
"The ATO, their view is that the pricing of that part of the value chain should be somewhat lower than what we believe it is."
Beaven said in a conference call today that the Singapore marketing hub was 64 per cent-owned by the Australian unit, and was therefore subject to Australian taxes.
In other BHP news, CEO Andrew Mackenzie has seen a major decline in his remuneration year on year in line with the falling market value of the company.
In 2014 MacKenzie was paid US$7.123 however this fell 35 per cent year on year due to ongoing difficulty in the market, down to US$4.6 million this year.