Glencore wins on transfer pricing
The full Federal Court has upheld a landmark ruling in favour of mining giant Glencore over transfer pricing.
The full Federal Court has upheld a landmark ruling in favour of mining giant Glencore over transfer pricing, throwing out a Tax Office appeal over a $92m disputed tax bill on copper sales dating back more than a decade.
The ruling largely upholds a decision made by Federal Court judge Jennifer Davies a year ago setting aside taxes levied against Glencore over claims for the costs of processing copper from its CSA mine in western NSW.
The ruling was seen as a blow for the Australian Taxation Office’s ongoing war on so-called transfer pricing arrangements, in which multinationals use complex transactions between members of the same corporate group to reduce their tax bills.
The ATO had objected to changes made by Glencore in 2007 to the way it calculated the costs of treating and refining CSA concentrate at a Glencore-owned refinery, hitting the group with a $92m bill for a three-year period until 2009, arguing the transactions were not done at “arm’s length”.
Rather than using benchmark rates to calculate treatment and refining charges, CSA and the Glencore refinery moved to a “price sharing” arrangement which charged CSA about 23 per cent of the prevailing copper price.
The ATO argued that Glencore would not have entered such an arrangement with an independent refinery, but lost the first round in the Federal Court.
Now the courts have upheld the original decision from a year ago, ruling against Glencore on only a minor part of the decision, covering about $2m worth of shipping charges dating back to shipments made in 2009.
Glencore welcomed the decision on Friday, and the ATO is believed to be considering its options for a High Court appeal.
With several similar transfer pricing cases afoot in the courts, the Glencore case and appeal have been closely watched.
The ATO this year hit aluminium giant Alcoa with a $1bn-plus bill including penalties and interest over alumina sale to Bahraini aluminium giant Alba between 1989 and 2009.
A separate action against Rio Tinto, over $447m worth of profits made by its Singapore marketing hub for iron ore sales and $86m in profits on aluminium sales, is destined to be settled without recourse to the courts, with Australian and Singaporean authorities agreeing to negotiate the tax split under a double-taxation treaty.