Glencore comes out on top of tax dispute

Glencore has won a dispute against the Australian Tax Office (ATO) after the Federal Court ruled the Swiss parent company paid the correct amount of tax on its copper concentrate purchases from an Australian mine.

The ATO alleged that Glencore’s head office did not pay market rates for the copper purchased from its CSA mine in New South Wales from 2007 to 2009.

Australia’s tax commissioner had accordingly raised Glencore’s tax assessment to more than $92 million.

The Federal Court decided that prices paid by Glencore were “within an arm’s length” and the company therefore did not breach any transfer pricing rules in relation to this.

Transfer pricing is meant to be achieved “within an arm’s length,” and when violated would affect the amount of tax an entity is obliged to pay in Australia.

The ATO claimed the court rejected aspects of its interpretation of the relevant transfer pricing rules, thereby calculating the purchase copper price to be within an arm’s length range. The ATO is considering whether to appeal the court’s decision.

“Transfer pricing rules ensure (international) transactions are priced fairly and that multinational companies do not underpay tax in Australia,” deputy commissioner Jeremy Geale said.

“The most significant issue in multinational taxation is ensuring that the Australian arms of companies have arm’s length dealings with offshore related parties.”

Glencore lost a high court bid to conceal its offshore financial activities from the ATO last month.

The ABC reported that the leaked Paradise Papers revealed Glencore was moving billions of dollars’ worth of assets into offshore tax structures.

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