WASHINGTON: Rio Tinto’s chief financial officer Chris Lynch has declared the US will become a more attractive investment location if Donald Trump delivers his promised business tax cuts as the mining giant disclosed it paid $US4 billion in taxes and royalties in 2016. The release of the report comes just days after it emerged the Australian Taxation Office hit Rio with an extra tax bill of $447 million — which the miner says it will challenge — over a dispute on the use of a marketing hub in low-tax Singapore, which books sales of billions of dollars. In his report, Mr Lynch backs pledges of a tax overhaul in the US, the biggest market for many of the miner’s businesses. “While it is too early in the process to comment about potential impacts for Rio Tinto, a significant lowering of the corporate tax rate and simplification of the tax code would make the US a more attractive investment location,” Mr Lynch writes. Mr Lynch’s comments will also put pressure on the Turnbull government to continue to push to pass the entirety of its sweeping company tax cuts. “If Australia remains with a 30 per cent corporate tax rate, this will come at a cost to investment and jobs, as other nations leave Australia behind,” Mr Lynch said.
Last month the government secured a tax cut for companies with up to $50m in annual turnover, but not for the biggest businesses. Scott Morrison has since insisted the government remains committed to the entire plan to cut the corporate tax rate for all companies to 25 per cent by 2026-27. On Friday, the government said the ATO had declared $2.9bn in tax liabilities for seven multinational companies, declaring it was “getting on with the job of ensuring multinationals pay the right amount of tax”. The report shows Rio has continued to reduce its exposure to tax havens, which Rio defines as a jurisdiction with a corporate tax rate below 10 per cent. The miner has 12 controlled entities now domiciled in tax havens — compared to 17 last year, as five have been liquidated. Of the remaining 12, four are dormant.
Overall, payments in taxes and royalties fell by 12 per cent compared to 2015 — in line with the trend since the peak of the mining boom. In 2012, Rio paid $US11.6bn in taxes and royalties, of which almost $US9bn was in Australia. For 2016, $US2.9bn was paid in Australia in royalties and taxes. Of this, $US1.3bn was in corporate income tax. Some $US1.3bn was for royalties (which are paid for the right to extract minerals) of which $US986m went to the West Australian government. While the lion’s share of Rio’s taxes were paid in Australia, the report shows that it paid $US249m in Canada, $US215m in Mongolia — which houses the Oyu Tolgoi copper project — and $US102m in the US. In Singapore, Rio paid $US25m in tax in 2016. The report says all transactions with the Singaporean subsidiaries are priced in line with OECD guidelines and local legal requirements. “While we are satisfied these transactions align with tax requirements, differences of interpretation between companies and tax authorities can occur,” it says. Last week, Rio revealed the ATO wanted it to pay extra tax of $379m plus $68m in interest — totalling $447m. The Australian and British dual-listed company has agreed to pay 50 per cent this month. But Rio has vowed to challenge the amended tax assessments and says it will seek double taxation relief in line with an Australia-Singapore treaty. Rio claims it made an economic contribution of $US35bn where it operated in 2016.
