BHP Billiton has evaded taxes for more than a decade, says Wayne Swan

Former Labor treasurer Wayne Swan has accused one of Australia’s biggest companies of evading taxes for more than a decade, and for lying to the former Labor government during the height of the mining tax debate.

Swan used parliamentary privilege on Wednesday to claim BHP Billiton had been “gaming the system” for years by using aggressive transfer pricing to smuggle profits out of Australia.

He said recent damning evidence from Senate inquiries and the Australian Tax Office showed BHP had ramped up its Singapore marketing hub between 2005 and 2014 to avoid paying taxes on profits of $5.7bn.

He said at the height of the mining tax debate in 2010, BHP had also inflated the impact of the minerals resource rent tax on its operations while funnelling its profits through foreign tax havens.

He said the public had only learned in April last year that the ATO had been auditing BHP’s tax arrangements at the time. He said BHP had failed to mention those audits when the mining tax debate was in full swing.

“Some of us in this place remember 2010 and the mining tax debate,” he said. “I remember it pretty well.

“Two things really stand out in my mind. One was BHP and Rio Tinto frothing with outrage at the very suggestion they were paying too little tax during a period when Australia’s mineral resources (owned by the Australian public, not by them) were enjoying record high prices.

“The other was the claim that the government’s proposed resource rent tax would destroy their operations, close projects and kill jobs.

“One of the central arguments BHP used at the time was that they paid very high rates of corporate tax, and this somehow excused paying a historically low share of tax on the supernormal resource rents they were earning.

“Well, now we know the truth. Between 2005 and 2014, BHP sold Australian minerals to its Singapore marketing hub to avoid paying taxes on profits of $5.7bn. While BHP paid $1bn in top-up taxes, these taxes only applied to 58% of the profit generated through the Singapore marketing hub.

“A full 42% of the profit was untaxed in Australia. Nor was it taxed by the government in the UK, where BHP is co-owned. The directors of BHP Australia and BHP UK are the same people.”

Swan said the tax paid by BHP represented only 10% to 12% of its total profits, made almost exclusively by selling Australian resources.

He said the miner’s Singapore operation was “clearly an artifice”.

“While BHP maintains that its Singapore operations are at arm’s-length from its Australian branch, I make the simple point again that the directors of both the UK and the Australian entities that control the Singapore hub are the same people,” he said.

“This situation is clearly an artifice.

“At the height of the mining tax debate BHP were inflating the impact of the minerals resource rent tax on their operations while funnelling their profits through foreign tax havens.

“As the government negotiated with miners in good faith on critical tax issues, the miners were expanding their tax avoidance regimes.”

Swan made his accusations in the House of Representatives while a parliamentary delegation from Singapore was looking on.

He then said attacked the Business Council of Australia, saying its failure to speak out about aggressive transfer pricing had compromised its “standing and credibility”.

“Tax avoidance is a huge part of the trashing of public faith in democratic legitimacy around the world,” he said.

“Everyday workers have the sense the economy is an inside/outside game, in which the wealthy play by different rules and everyone else is denied opportunity.

“They’re not wrong. And at least in part, this is what is driving the popularity of modern political demagogues from Donald Trump to Marine Le Pen.

“And the activities of companies like BHP in Australia who are constantly making pious calls for bipartisanship and quality reform, are leading to further polarisation and less faith in our democratic institutions.”

A spokesman for BHP Billiton sent this response to Guardian Australia.

“Our Australian adjusted effective tax rate, inclusive of corporate tax, petroleum resource rent tax, and royalties, in financial year 2016 was approximately 57%. Our global rate was slightly higher at 59%. This demonstrates that we pay our ‘fair share’ of tax both in Australia and globally.”

BHP did not say anything about the years before 2016.

Swan said there was a conventional distinction, in typical tax discussions, between legal tax avoidance and illegal tax evasion, but in reality there was a spectrum.

“[BHP’s] behaviour leads me to believe that they have operated at the evasion end of the spectrum for over a decade,” he said.