September 21, 2016 / 10:22 AM / a year ago

BHP readies for tax fight as Australia cracks down on offshore hubs

A promotional sign adorns a stage at a BHP Billiton function in central Sydney, Australia August 20, 2013. REUTERS/David Gray/File Photo

SYDNEY (Reuters) - BHP Billiton (BHP.AX)(BLT.L) has threatened court action against the Australian government over demands it pay $767 million in back taxes and penalties stemming from its use of a foreign tax haven amid a national crackdown on corporate tax loopholes.

Australia is chasing the mining giant and other multi-national firms for taxes it claims they owe on profits; in BHP’s case channeled through the more tax-friendly Singapore.

BHP will initiate court action if needed against an assessment by the Australian Tax Office (ATO) that the miner pay amended back taxes spanning a 11-year period between 2003 and 2013, said the miner’s chief financial officer, Peter Beaven.

“BHP Billiton does not agree with the ATO’s position,” Beaven said, while releasing the company’s fiscal 2016 report on its global tax bill.

“Consequently, we have objected to all of the amended assessments and intend to continue to defend our position, including by initiating court action if necessary,” he added.

The dispute with BHP comes at a time when the ATO has increased scrutiny over how much tax hundreds of multi- nationals operating in Australia pay.

Prime Minister Malcolm Turnbull, under criticism for being soft on big business, has outlined a new task force led by the ATO, and tighter rules to close tax loopholes and raise up to A$3.3 billion ($2.49 billion).

“Steps are being taken, but there’s no question that not enough is being done,” said Scott Ludlam, a Greens Party senator in Western Australia, where much of the country’s minerals are mined. “So many of these companies are well-versed in the tax codes and fight back tooth and nail.”

Australia has led efforts by the Group of 20 rich nations to close corporate tax loopholes. Last year it published records of scores of companies, including Google Inc (GOOGL.O) and Apple Inc APPL.O, which show they paid little or no tax on Australian earnings.

“The name of the game for so long has been pay as little as you can,” a lawyer representing firms operating in Australia with operations also offshore said on the condition of anonymity. “Any reforms are going to be hard to swallow.”

BHP, as well as fellow miner Rio Tinto (RIO.AX) (RIO.L), were included in an ATO investigation over using Singapore-based marketing hubs - dubbed “Singapore slings” - in order to operate under an effective tax rate of zero.

An Australia senate corporate tax inquiry last year accused BHP of using its Singapore marketing office to shift profits from Australia to minimize tax.

Since then, the ATO has introduced new guidelines for foreign trading hubs and has held talks with around 170 companies over compliance.

The BHP dispute stems from the price BHP sells its commodities produced in Australia to its Singapore business before selling them to customers for a profit.

“It’s an evaluation issue, it’s not a tax avoidance issue,” BHP’s Beaven said.

The ATO declined to comment on the dispute with BHP.

Reporting by James Regan; Editing by Himani Sarkar

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