BHP Billiton faces Australian tax bill of more than $1 billion

The tax office has hit BHP Billiton with fresh tax assessments, amid a crackdown on the use of tax havens.

BHP’s chief financial officer Peter Beaven has defended the company’s business practices. Picture: David Geraghty

The Australian Taxation Office has hit BHP Billiton with fresh tax assessments over the mining giant’s Singaporean marketing office, pushing the total claimed to more than ­$1 billion.

BHP’s Singaporean operation, which employs about 400 people, has been under the microscope in a long-running audit, amid a tax office crackdown on the use of marketing hubs in the tax haven by Australian resources companies.

In a previous audit, BHP was slugged $362 million in extra taxes, interest and penalties for the period 2003-08. BHP’s new bill, revealed by the company in a tax transparency report to be released today, adds $537m for the years 2009 to 2013 and an extra $117m in added mining tax.

The tax office last month drew a line in the sand over the use of Singaporean hubs, saying any company showing a profit margin of more than 100 per cent in the tax haven would be at increased risk of a full-scale audit or legal action.

Deputy commissioner Jeremy Hirschhorn told The Australian at the time: “Doubling your money is very generous.”

BHP chief financial officer Peter Beaven defended the Singaporean office as a vital link between mines in Australia and customers in China that pumped up the eventual price paid by customers. “Each step is as important and legitimate as the next, including marketing,” Mr Beaven said.

He said BHP was ready to fight the case in court. “We’re very confident of our position,” he said.

Legal action to resolve the stoush appears likely because, despite ongoing talks, BHP has so far been unable to strike a deal with the ATO.

Under a deal with the Singaporean government, BHP’s marketing arm does not pay any tax in the city state. However, about 58 per cent of profit generated in Singapore is taxable in Australia.

BHP’s report reveals that in addition to the Singaporean hub, it has 10 subsidiaries in tax havens including the British Virgin Islands and the Cayman Islands, although the company says most of them are legacies of previous ­acquisitions and are dormant or being wound up.

BHP is keen to distinguish itself from technology sector firms such as Apple, which late last month was on the wrong end of a European Commission ruling that found Ireland had failed to levy $19bn in tax on the tech giant.

Last year, BHP paid about $US1.8bn in corporate tax to countries around the world, plus $US1.48bn in royalties, its tax transparency report shows.

Mr Beaven said BHP supported the Base Erosion and Profit Shifting program, a multinational push to crack down on tech­nology sector tax dodging, being co-ordinated by the Paris-based Organisation for Economic Co-operation and Development.

The company’s global head of tax, Jane Michie, said BHP would not be affected by Australia’s new multinational anti-avoidance law, or “Google tax”, which is designed to stop companies dodging taxes by pretending sales here ­actually happen overseas.

Mr Beaven said BHP was “very happy” with the increased level of interest in — and scrutiny of — multinational tax practices.

“Transparency’s absolutely critical to ensure that any public dialogue on the issue is in fact based on fact, not on ... populist misconceptions of who does what and who pays what,” he said.

“Public confidence in the ­integrity of tax rules, both ­globally and domestically, is a necessary aspect before you can have any meaningful debate about whether a country’s tax system is delivering what that country needs.”