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By Peter Hill
Australian mining giant BHP Billiton Ltd says it paid $4.7 billion in global taxes and royalties to governments for the 2017 financial year.
The figures, released Sept 20 as the Melbourne-based company published its annual report, include $3.793 billion paid to the Australian government, $346.6 million to Chile and $261.1 million paid to the U.S.—its three largest tax payment jurisdictions.
When added to payments of $16.6 billion to over 10,000 suppliers across the globe, plus wages, employee benefits, and dividends, the company’s total direct contribution was $26.1 billion.
BHP further expects to pay $1.2 billion before the end of 2017 in final income tax payments for its 2016-17 Australian tax year, making the company “one of the largest taxpayers in Australia”, according to Peter Beaven, the company’s chief financial officer. It is also one of Chile’s largest taxpayers.
While BHP’s statutory effective tax rate for FY 2017 was 39.7 percent, its globally adjusted effective tax rate was 34.0 percent. According to BHP’s 2017 Economic Contribution Report, this rate excludes the influence of exchange rate movements and exceptional items, to give a clearer picture of its tax contributions “and how it changes over time.” Beaven added that “once royalties are included our FY 2017 rate increases to 44.0 per cent.”
BHP’s 2017 ECR, together with its annual report, details the taxes and royalties BHP paid on a country-by-country and project-by-project basis in FY 2017.
The company also disclosed that it is in discussions on “potential agreements in relation to our intra-group service charges” with the Australian Tax Office; the U.S. Internal Revenue Service; and the U.K. tax authority, Her Majesty’s Revenue and Customs.
In the meantime, BHP is still engaged with a transfer pricing dispute with the ATO in connection with commodity payments to its Singapore Marketing business. BHP objected to assessments spanning 11 years from 2003 to 2014 totaling A$1.0 billion ($820 million), and will “continue to defend our position, including by initiating court action if necessary.” According to BHP, the ATO is also auditing the three years from FY 2014 to FY 2016.
BHP said its ECR complies with U.K. regulations, which implement the EU Accounting Directive, by listing all tax payments made over the 2017 fiscal year to all governments globally, from the federal level down to local council government level.
Beaven stated in his introductory statement to the ECR that the report also “includes information, which we are disclosing on a voluntary basis, such as detailed information about our limited use of companies in ‘low-tax’ jurisdiction and complies with the Australian Voluntary Tax Transparency Code.”
BHP states in its ECR that “being open about the taxes and royalties we pay to governments is in the best interests of our shareholders, employees, customers and the communities in which we operate. Transparency allows for an informed debate on the integrity of tax regimes and the contribution we do—and should—make in the countries in which we operate.”
BHP also disclosed in its ECR that as of the 2018 fiscal year, the Risk and Audit Committee of the BHP Board will seek annual assurance that its stated six global tax principles have been followed. These principles cover transparency, corporate citizenship, risk management and governance, business rationale, compliance, and advocating reform.
On reform, the company says that is supportive of reducing the tax rate in Australia from 30 percent “to a rate that is closer to the OECD average” of 25 percent. It also supports the organization’s view that “a country’s tax mix should minimise distortions to business investment decisions and raise revenues from the taxes that do the least damage to economic efficiency and growth. This means more reliance on efficient taxes such as indirect and land taxes, and less on capital and income taxes which can distort investment decisions.”
The company notes it has a “Key Taxpayer” risk rating in Australia with the ATO, which “reflects the likelihood of adopting a tax position that the ATO disagrees with … is lower, but the consequences of potential non-compliance are higher…”
“This is the lowest risk rating BHP can possibly achieve given our scale,” it said in its report.
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