Australia’s taxman says James Hardie potentially owes it $100m on profits

A four-year probe by the tax office has concluded that global construction giant James Hardie, which relocated to Ireland, potentially owes it $100m on profits it made.

James Hardie moved its corporate headquarters to the Netherlands in 2001 and to Ireland in 2010.

Global construction giant James Hardie Industries is facing a $100m tax bill in relation to profits allegedly shifted to tax-friendly Ireland.

An Australian Taxation Office audit has found that profits linked to James Hardies’ technology company in Ireland should be allocated to its Australian subsidiaries and taxed in this country.

The findings follow a four-year probe by the ATO into James Hardies’ global inter-company transfer pricing arrangements.

Transfer pricing is used by multinational corporations to shift profits between countries where they operate and into more favourable tax jurisdictions.

In some cases it can involve a multinational selling itself goods and services at an artificially high price.

The audit examined James Hardie’s income from April 1, 2010 through to March 31, 2019.

The ATO has asked James Hardie to provide a “technical and factual response” to its findings and it may subsequently issue a statement of audit position.

James Hardie has defended its transfer pricing arrangements, saying they comply with applicable tax legislation, and said that it strongly disagrees with the ATO’s position. But it has warned that if it is ultimately unsuccessful in disputing the ATO’s position, it faces a $110m tax bill, not including interest charges and potential penalties.

James Hardie Industries chief executive Aaron Erter.

Concluding an audit with the ATO and resolving any amounts in dispute can take significant time, particularly if the matter results in either litigation or the involvement of other national tax authorities as a means of resolution, the group warned.

The company would keep the market informed of developments in accordance with its continuous disclosure obligations, it said in a statement to the ASX.

James Hardie has its headquarters in Ireland, but is now largely run out of Chicago.

It is one of the world’s biggest makers of fibre cement and gypsum board used in construction and exterior cladding.

The company’s biggest sales boost is coming from the renovation market, particularly in the US, where the housing stock is rapidly ageing.

James Hardie is also now marketing direct to homeowners. James Hardie chief executive Aaron Erter, who is based in Boston, last year cancelled a major manufacturing factory that the company was building in Melbourne’s western suburbs.

Construction of the plant had gone on for 18 months, with design and construction contracts in place. The exercise to shut down the project will be expensive, but the sale of land may ease the financial hit.

Under Mr Erter, James Hardie has pulled back spending and sought to protect profit margins over market share.

James Hardie shares rose 0.6 per cent to $59.03 on Tuesday.