BHP and Rio Tinto under audit for Singapore hubs used to lower tax bills
Australia’s biggest miners, BHP Billiton and Rio Tinto, have told the Senate inquiry into corporate tax avoidance that they are under audit by the Australian Taxation Office for allegedly shifting profits through marketing hubs in Singapore.
The Singaporean hubs are used by multinationals including the tech giants and miners to reduce the tax they pay in Australia, although they have disputed this, saying it’s a genuine marketing hub that they use to enhance their services and products.
On the third day of the inquiry’s hearings, held in Melbourne, the debate was heated with BHP Billiton executives refusing to answer questions from senators on how big a potential tax bill the company faced because of its Singapore hub.
Rio Tinto’s Australian managing director, Phil Edmands, told the inquiry that its Singapore hub made a $719 million profit and paid a 5 per cent tax rate ($44 million) in 2014.
Rio Tinto also admitted that it was under audit by the Tax Office but said it had not been given a position paper setting out the additional amount of tax the ATO was claiming back.
BHP corporate affairs president Tony Cudmore cited commercial sensitivity for not revealing figures for its Singapore operations, but its own sustainability report states that the amount was $26 million in 2014.
“Your credibility is shattered by the fact your competitor is prepared to share those figures,” Independent Senator Nick Xenophon said.
Mr Cudmore and BHP’s head of group tax, Jane Michie, also refused to answer repeated questions from Greens senators on whether there was a position paper from the ATO setting out how much tax is owed by BHP.
The inquiry chair, Sam Dastyari, intervened and said: “You can’t just not answer because you don’t want to. This is serious.”
Then Mr Cudmore cited commercial sensitivity and claimed public interest immunity – a claim that the Senate Economic References Committee had to stop the hearing to consider, but that they ultimately rejected. BHP will now have to come back to the committee with a response within a fortnight.
BHP in its 2014 annual report has said its global operation is facing US$1.65billion in contingent litigation liabilities which could include tax.
Earlier in the day miners Glencore and Adani also appeared.
Glencore revealed it was absorbing its Singapore marketing hub into its global operations and that Australian coal sales would be managed domestically. The Singapore hub had been used to simplify the corporate structure it inherited through the acquisition of Xstrata in 2013.
Glencore also revealed it made a $1.4 billion loss in Australia for the 2014 financial year. This was on $13 billion of revenue, and it had paid $77 million in tax.
Glencore’s Australian regional finance lead, Nick Talintyre, said the company did not consider Singapore a tax haven, but rather a “trading hub”.
Adani, in its testimony, said over the course of the life of its proposed mining project it would make $4 billion in profit and pay $2.2 billion in royalties taxes.
