Chevron accused of scam against Australian taxpayers

Oil giant and Gorgon project developer Chevron faces accusations of running an aggressive tax avoidance scheme which derives profits from the Australian Tax Office.

SMH reported the findings of a report commissioned by unions in the United States, which shows the company created artificial interest payments against which it could exploit tax relief benefits.

The report described the Chevron scheme as “a sham” which “actually profited from the act of borrowing money at the expense of the Australian taxpayers”.

“It goes beyond any commercial objective of providing debt finance leverage to the point where the value of its tax benefits from interest deductions exceeds the actual before-tax cost of the loan", the report said.

SMH said the report was yet been made public.

With the ATO currently pursuing Chevron in the Federal Court for $322 million including penalties, it is alleged the company designed a corporate structure in order to avoid $258 million in taxes from 2004 to 2008.

The scheme involved setting up a US subsidiary of Chevron Australia Holdings Pty Ltd (CAHPL) called Chevron Funding Corporation (CFC), which was established in the US tax-haven state of Delaware.

CFC borrowed US$2.45 billion in several tranches at an initial interest rate of 1.2 per cent and then loaned it to an Australian entity at 9 per cent interest, which it is alleged resulted in $862 million in tax free dividends over five years.

The union report states the interest on those loans “ranged from 8.8 per cent to 10.5 per cent", and that Chevron claimed tax deductions on those interest repayments to the rate of 30 per cent, exempt from withholding tax.

It has also been suggested that the ATO’s court case, in focussing on the margins above base interest rate as being not at arm’s length, has failed to fully tackle the broader issue of tax avoidance intended to make profits at the expense of the taxpayer.

A source said Chevron has recently opted to avoid making media statements on any issue in the lead up to their annual general meeting.

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