The financial statements in BHP’s Annual Report gives some insight into BHP’s tax disputes, which had been the focus of the Parliamentary inquiry (n Item 5: Income Tax Expense, p173 of the Annual Report).
- It discloses that it has disputed transfer pricing liabilities, in relation to its Singapore ‘Marketing Hub’ of $897m for the 11 years from 2003 to 2013. It also discloses that the ATO is auditing 2014 – 2016.
- It discloses a disputed 2013 amended ‘Minerals Rent Resources Tax (MRRT) liability of $90m.
- It also discloses a $87m dispute with the ATO over whether the income of its Singapore Marketing Hub can be attributed to the Australian controller, under the Controlled Foreign Corporation (CFC) provisions over the 2006 – 2010 years.
- This makes a total of $1.1 billion of disputed tax.
[BHP’s website: Annual Report Portal, Annual Report; FJM; LTN 184, 26/9/17; TM Sept 2017]
Extract from the Financial Statements in the Group’s Annual Report (p173)
Transfer pricing – Sales of commodities to BHP Billiton Marketing AG in Singapore
The Group is currently in dispute with the Australian Taxation Office (ATO) regarding the price at which the Group’s Australian entities sell commodities to the Group’s principal marketing entity in Singapore, BHP Billiton Marketing AG.
In April 2014, the Group received amended assessments for 2003-2008 totalling US$278 million (A$362 million) (inclusive of interest and penalties). In May 2016, the Group received further amended assessments totalling US$413 million (A$537 million) (inclusive of interest and penalties) for 2009–2013. The ATO is currently auditing the 2014–2016 income years. The Group has formally objected to the amended assessments. The ATO has yet to advise its decision on the objections to these amended assessments. The Group has made payments of approximately US$221 million (A$276 million) to the ATO in relation to the assessments under dispute pending resolution of the matter. [$362m + $537m = $897m over the 11 years from 2003 to 2013]
As a consequence of the finalisation of the transfer pricing audit for 2009–2013, in June 2016, the Group also received an amended assessment in relation to its 2013 MRRT return totalling US$90 million (A$117 million). The Group has formally objected to the amended assessment and has made a partial payment of US$39 million (A$52 million) in respect of the MRRT amended assessment.
[$897m transfer pricing dispute + $117m MRRT assessment = $989m total]
Controlled Foreign Companies dispute
The Group is currently in dispute with the ATO regarding whether profits earned globally by the Group’s marketing organisation from the on-sale of commodities acquired from Australian subsidiaries of BHP Billiton Plc are subject to ‘top-up tax’ in Australia under the Controlled Foreign Companies rules.
In June 2011 and December 2014, the Group received amended assessments relating to the 2006–2010 income years. The Group has objected to these amended assessments. On 30 June 2016, the Group received the ATO’s decision relating to the Group’s objection against these amended assessments. The objections were allowed in part by the ATO. The ATO also determined that the Group was not liable for any penalties. As a result of the objections being determined, it is estimated the primary tax subject to dispute for the 2006–2010 income years will total US$33 million (A$43 million). The Group has sought review of the disallowed objections.
Between May 2016 and May 2017, the Group received amended assessments for primary tax of US$30 million (A$39 million) relating to the 2012–2015 income years, and interest of US$4 million (A$5 million) (with nil penalties). The Group has formally objected to the amended assessments. [$43m + $39m + $5m = $87m]
[Total: $897m transfer pricing dispute + $117m MRRT disput + $87m CFC dispute = $1,101]