Monday, April 24, 2017
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Chevron faces big Australian tax bill after court loss

/ 12:48 AM April 22, 2017

Energy giant Chevron on Friday lost its appeal in a major battle against a Aud$269-million ($203 million) tax bill in a case that could have global implications for multinationals looking to cut their obligations.

The Federal Court ruled in favor of a 2015 decision by the same court that the US giant had minimized its payments through a loan scheme and ordered it to foot costs, estimated by local media at more than Aud$10 million.

The ruling is a significant victory for the Australian Taxation Office (ATO), which is investigating other global firms for alleged avoidance.

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It also followed an announcement by Canberra this month that seven multinationals were facing a total of Aud$2.9 billion in bills after assessing their tax arrangements.

Chevron said in a statement that it was disappointed with the outcome.

“We will review the decision to determine the next steps, which may include an appeal to the high court of Australia,” a spokesperson said.

A response from the ATO was not immediately available.

The ruling was closely watched as governments cracked down on multinationals that build complex structures to reduce taxation.

Chevron added in its statement that the trial court had recognized that the financing was a “legitimate business arrangement” and that the parties differed only over what interest rates should have been applied to the loans.

KPMG tax partner Grant Wardell-Johnson said the decision was a “substantial win” for the ATO.

The court heard that Chevron subsidiary ChevronTexaco Funding Corporation, which was incorporated in the US state of Delaware, had loaned its Australian arm $2.5 billion in 2003 at a favorable interest rate.

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But tax officials said the rate of repayment—which could be set against tax—was much higher than if it had borrowed from another company. —AFP

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