Profit-shifting has not paid off for petroleum multinational Chevron, slugged with a tax bill for $322 million thanks to a Supreme Court decision on Friday.
Chevron has been under close scrutiny this year, particularly since a senate inquiry into tax-avoidance in April which also put mining giants BHP, Rio Tinto, Glencore, FMG and Adani’s accounting practices in the spotlight.
AFR reported that the tax bill may even climb as high as $600 million, as the court decision only relates to $US2.4 billion in loans made by Chevron US to Chevron Australia in 2002, costing the US arm 1.2 per cent but charged to Australia at nine per cent, resulting in total dividends in $1.1 billion up to 2008.
The initial profit-shifting loan scheme continued until the end of 2010, and Chevron is now under audit by the ATO for tax affairs between 2010 and 2014.
Since the initial 2002 loan of $US2.4 billion, Chevron Australia now holds $36 billion in debt to the US arm, and paid $1.8 billion in interest last year, despite costs on the loans to Chevron US being only $350 million.
The court found that the interest paid by Chevron Holdings Australia to US subsidiary Chevron Texaco Funding Corporation exceeded an “arms length price” for borrowing, as related to transfer pricing rules.
Senator Sam Dastyari, who headed the Senate tax avoidance inquiry, said the decision sent a strong message to multinationals operating in Australia.
"I congratulate Tax Commissioner Chris Jordan and his team for this important and significant victory. I welcome the court's decision, and the signal that it sends to multinationals operating in Australia."
"The tentacles of multinational corporations like Chevron must pay tax wherever they unfurl."
The Maritime Union of Australia (MUA) national secretary Paddy Crumlin said it was important to scrutinise Chevron in the lead up to commissioning of LNG projects such as Gorgon and Wheatstone, with Australian LNG exports due to triple in in the first years of production.
"Billions of dollars of tax revenue could be lost to the Australian people unless the government takes an aggressive approach to major tax minimisers like Chevron," he said.
The multinational has indicated that it is considering whether to appeal the decision, however a spokesman for Chevron said, “Chevron does not intend to comment further while appeals are being considered”.
The exact figure Chevron will owe the Australian Tax Office (ATO) is not yet clear, however it is expected that the tax bill plus penalties will amount to $322 million.
Other sources suggest the total will be $270 million, although Chevron will also be expected to pay the ATO legal costs, an amount which must be agreed upon within 21 days.