Rio Tinto says work to combat base erosion, profit shifting and tax avoidance could go too far and discriminate against multinational companies

Rio Tinto has warned that multinational companies could be discriminated against if moves to combat tax “base erosion and profit shifting” went too far.

With Australia and the other 33 member nations of the Organisation for Economic Co-operation and Development ramping up efforts to prevent multinational companies avoiding tax, Rio chief financial officer Chris Lynch said nations had to make sure new rules did not damage the investment environment.

Rio has participated in the OECD process, and Mr Lynch stressed his company supported the spirit of the work underway. But he cautioned against proceeding with some of the ideas being investigated by the OECD.

“Some of the areas under discussion in the base erosion and profit shifting project have the potential to go much further than eliminating aggressive tax practices, and could move to discriminating against multinational businesses in general, rather than creating a fairer tax system,” he said.

“We are also concerned about the potential for double taxation resulting from this initiative.”

The comments were made in Rio’s “Taxes Paid” report for 2014, which revealed the company had paid $5.63 billion worth of taxes and royalties to state, federal and local governments in Australia during the year.

More than half of that was paid into federal government coffers, while $US1.8 billion of it was paid to the Western Australian government, which hosts Rio’s massive iron ore operations.

Total taxes paid in Australia were slightly lower than last year’s $US5.7 billion, largely due to the fact the company’s underlying profit was $US900 million lower in 2014 than 2013.

Tax and royalty payments in Australia were easily bigger than Canada, which received the second highest amount of taxes from the miner.

Globally, the company paid $US7.1 billion of taxes and royalties in 2014, which amounted to 43 per cent of its underlying profits before tax.

“Rio Tinto continues to be a major contributor to the economies of its host nations, but most particularly in Australia,” said Mr Lynch.

Rio said it operated in nine nations that “might be considered to be ‘tax havens’,” and while it did not name those countries, it was likely referring to Switzerland and Singapore among others. Rio said only 20 of its 594 subsidiaries were located in such havens, and it was not using them to dodge tax.

“Rio Tinto does not engage in aggressive tax avoidance,” the miner said.

Rio employs more than 300 people in its Singapore hub, and paid $44 million in taxes there. It paid $3 million of tax in Switzerland.

Rio has published the “taxes paid” report for five years now, and comes ahead of the Australia Tax Office’s plan to publish the amounts of tax paid by companies in a bid to deter tax avoidance.