CANBERRA: An Australian subsidiary of U.S. energy giant Chevron Corp. lost a court appeal on Friday against a 340 million Australian dollar ($260 million) tax bill in a ruling with ramification for how multinational corporations transfer money. Three judges of the Australian Federal Court unanimously rejected Chevron Australia’s appeal against tax assessments for five years ending in 2008. The court found the company had reduced its Australian tax cost through 9 percent tax-deductible interest payments on a $2.5 billion loan from U.S.-based subsidiary Chevron Texaco Funding Corp., which had borrowed the money at a lower rate. The Australian Taxation Office welcomed the ruling which it said has direct implications for other cases the office is pursuing regarding loans within multinational corporations.
Australia has some of the world’s toughest rules to ensure it collects the correct amount of tax on profits made in the country, said Treasurer Scott Morrison. Chevron said it was disappointed and might appeal to the High Court of Australia. “As recognized by the trial court in the dispute, the financing is a legitimate business arrangement and the parties differ only in their assessments of the appropriate interest rate to apply,” a Chevron statement said.
Grant Wardell-Johnson, a tax partner at KPMG, described the ruling as a “critical case.” “This is a substantial win for the (Australian Taxation) Commissioner, and many taxpayers will need to review their transfer pricing methodologies,” Wardell-Johnson said. Tax authorities have said seven global technology, energy and resources companies will receive a combined bill for outstanding tax of AU$2 billion ($1.5 billion) by the end of June. The companies have not been named.
