BHP Billiton faces A$522m Australian tax dispute

BHP Billiton has revealed a A$522m (US$410m) dispute with tax authorities in Australia after the miner faced scrutiny from lawmakers in the country over whether a marketing hub in Singapore helps it to reduce its tax payments.

BHP also revealed it paid $121,000 in tax in Singapore since 2006 after earning profits of $5.7bn in the Asian country. Over the same period BHP paid $945m in Australia on the profits earned by its Singapore unit.

The Anglo-Australian group is one of a number of global companies that have had their tax affairs scrutinised in Australia as part of a parliamentary inquiry into corporate tax affairs, and in particular whether companies are using complex structures aggressively to minimise their payments in the country.

Australia relies heavily on corporate tax revenues. The share of the total tax take that comes from company tax is almost 20 per cent, more than twice the average in Organisation for Economic Co-operation and Development countries.

BHP, which is headquartered in Melbourne and mines coal, iron ore and other commodities in Australia, is the country's largest corporate taxpayer, with payments of A$4.9bn last year. The miner said royalties and other taxes meant that its total payments last year were $8.7bn.

In its disclosure to the Australian Senate committee's inquiry, BHP said it faced demands from tax authorities for A$522m in unpaid tax, interest and penalties in relation to its Singapore marketing organisation.

"BHP Billiton firmly believes in the positions it has adopted in its income tax returns in relation to both of these matters," the company said.

The demands cover a period from 2003 to 2010, with BHP saying the Australian Tax Office was auditing subsequent periods.

Singapore has become an important global commodities marketing hub, with most big mining companies having set up operations there, partly for its proximity to main Asian customers.

BHP said Singapore's government had given it a tax incentive for its marketing in the country "for its contributions to the development of Singapore's commodities sector", covering what BHP said was the "vast majority" of its marketing subsidiary's income in Singapore.

Glencore, another global mining and commodities trader, earlier told the Australian parliamentary inquiry that it would be closing its coal marketing business in Singapore.

Part of the dispute between BHP and Australia's tax office relates to transfer pricing - the prices at which BHP's producing subsidiaries in Australia sell to the Singapore arm.

A further part of the dispute relates to BHP's dual listing, which means the company has corporate structures in Australia and the UK. BHP's Singapore marketing arm is 58 per cent owned by the Australian side of the business, and pays tax in Australia on a corresponding percentage of profits.

The dispute with Australia's tax office is over whether the 42 per cent of marketing profits attributable to the UK side of the company should also be subject to a so-called "top up tax" in Australia.

Senators have also scrutinised companies such as Google, Apple and Microsoft over whether they are using corporate structures to reduce tax bills in Australia.

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