The Chevron-operated Wheatstone project, which is soon to begin production. Image: Chevron.
BY ELIZABETH FABRI
US oil and gas giant Chevron faces one of the largest tax bills in Australian history – believed to be more than $1 billion – after backing out of its High Court appeal over a tax evasion dispute.
In August, Chevron withdrew its appeal over a Federal Court ruling in April that the company had underpaid taxes between 2004 and 2008 by setting up a $US2.5 billion loan from a Chevron subsidiary in Delaware, with an abnormally high interest rate; enabling the company to shift profits offshore and lower tax on its Australian income.
The dispute involved $340 million in unpaid tax and penalties, however Chevron revealed in June the total tax disputes it had with the ATO amounted to $1.062 billion.
Chevron said it reached an agreement with the ATO on the loan transfer pricing dispute, but declined to comment on the details of the settlement or its reasons for withdrawing.
“Chevron believes the agreed terms are a reasonable resolution of the matter and are not expected to have a material impact on the year to date results of the company,” Chevron told Reuters.
An ATO spokesman said the judgement was “one of the most important decisions in corporate tax in Australia”.
“We have been very clear that this case would have direct implications for a number of cases the ATO is currently pursuing in relation to related party loans, as well as indirect implications for other transfer pricing cases,” the ATO spokesman said.
Federal Revenue and Financial Services minister Kelly O’Dwyer welcomed the news, claiming the resolution of this matter was “a significant win for the Australian community”, and bring in additional tax revenue from multinational companies over the next decade who were avoiding Australia’s 30 per cent company tax rate.
“Chevron sought to challenge Australia’s transfer pricing rules and the appropriate method for establishing an arms-length interest rate for a related party loan,” Ms O’Dwyer said.
“The ATO’s initial estimates are that the Chevron decision will bring in more than $10 billion dollars of additional revenue over the next ten years in relation to transfer pricing of related party financing alone.”