The five biggest players in the Australian mining industry are scheduled to give evidence at today’s senate inquiry hearing into corporate tax avoidance.
The hearing in Melbourne will bring representatives from Glencore, Adani Mining, Rio Tinto, FMG and BHP, to explain the nature tax accounting in each business and their use of offshore tax havens.
In his written submission to the inquiry, FMG boss Nev Power said the relatively straightforward nature of Fortescue’s business meant that the company had paid an effective tax rate of approximately 30 per cent each year.
Since the company’s launch in 2003, FMG claims to have paid $4.5 billion in combined taxes and royalites, and has corporate subsidiaries in Singapore (three companies related to shipping and sales), Hong Kong (holding company for Iron Bridge development), Mozambique (listed as “dormant”), and Guernsey (insurance), as well as New Zealand (dormant)and the US (financing).
Power acknowledged the focus on a need for tax reform globally given the increasing national budget deficit, but suggested that attention needed to span all industries.
“In Fortescue’s opinion, it would be harsh, unfair and distortionary to impose upon one sector or industry (i.e. the resources sector) a disproportionate tax cost,” he said.
“The recent fall in the iron ore price supports the proposition that the iron ore market is volatile and the risk/reward dynamic is balanced.
However, the iron ore boss also pointed out that it was possible foreign companies could have an unfair competitive advantage over Australian companies through the corporate practices.
“Fortescue’s ability to compete is in part dictated by the competitiveness of the Australian tax regime, he said.
“The current focus on Base Erosion and Profit Shifting is a clear example that companies who seek to adopt aggressive tax avoidance and minimisation practices can lead to such companies having a competitive advantage over say Australian domestic companies.
“As such it is important for industry to contribute, and Fortescue supports (and is a willing participant), in an informed and substantial tax reform debate.”
FMG chief financial officer Stephen Pearce will appear at the hearing today to give evidence.
"Fortescue has always acknowledged its obligation to ensure the Australian people get a fair return from their resources and paying our sahre of tax to the Australian Government is a key element of this contribution," he said.
Both BHP and Rio Tinto have been accused of avoiding payment of billions of dollars worth of corporate tax to the Australian government through the use of subsidiary marketing companies based in Singapore.
The senate committee into corporate tax avoidance in Melbourne today will hear evidence from Glencore and Adani at 1pm EST, and from Rio Tinto, FMG and BHP at 3.15pm EST.