Tax Commissioner Chris Jordan told the inquiry that multinational oil and gas companies were a particularly high-risk category. Photo: Christopher Pearce The ATO has another audit underway relating to a $35 billion loan for the Gorgon gas project. Photo: Supplied
An appeal against a multimillion dollar tax bill owed by multinational oil giant Chevron is taking place, and will have global implications for the way tax paid by large companies is assessed.
Chevron recently lost a landmark profit-shifting case in the Federal Court that left it with a tax bill of about $300 million.
Monday marked the first day of hearings of Chevron’s appeal to the Full Federal Court.
The ATO has been fiercely battling Chevron in court over unpaid taxes between 2004 and 2008.
In October the ATO won its case, arguing Chevron used a series of loans and related-party payments worth billions of dollars to slash its tax bill by about $300 million.
The decision was a big win for the ATO, which has spent about $10 million on legal costs to date.
The tax and business community are closely watching what happens with Chevron’s appeal.
“This court case is of major significance in and internationally,” said International Transport Workers Federation senior researcher Jason Ward. The union, which represents workers on the offshore LNG projects of WA, has been a vocal critic of Chevron.
“Chevron has been using related party loans – sending profits to low-tax jurisdictions such as Delaware – to reduce the tax that they pay in ,” Mr Ward said.
He said people around the world were also watching this case closely as it would impact what other multinationals are doing in low-tax jurisdictions.
The case is unravelling as the ATO has another audit underway relating to a $35 billion loan that Chevron has used in relation to the Gorgon gas project.
“The implications on the current loan, not subject to this case, are huge,” Mr Ward said. “Upwards of $15 billion in tax revenue in by Chevron’s own admission.”
The long-running Senate inquiry into corporate tax avoidance will resume hearings this year, with a special focus on oil and gas companies. The inquiry has broadened the scope of the hearings to include the complex structures that such companies use.
At earlier hearings held in November 2015, Tax Commissioner Chris Jordan and one of his lieutenants told the inquiry that multinational oil and gas companies were a particularly high-risk category and that the use of so-called marketing hubs, which allow sales and profits of n resources to be booked overseas, were an “emerging concern” for the ATO.
Chevron is one of several multinationals facing a showdown with the tax man. The ATO in December confirmed that apart from Chevron, Crown and BHP Billiton are among seven large companies that have been hit with tax bills amounting to $2 billion.
But that revenue could take time to flow through, if at all. While in recent years most companies have opted to settle with the ATO, the agency is expecting some other companies will head to court.
Follow Nassim Khadem on Facebook and Twitter.