Chevron To Australian Court: Appeal Affects Disputes Worth Billions

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By Murray Griffin

There are a billion reasons why Chevron’s tax dispute with the Australian Taxation Office is important enough to be allowed a last-chance appeal, the company told the High Court of Australia.

Chevron’s application for special leave to appeal to the high court, filed May 19, said the ATO described earlier rulings on the matter as having “direct implications” for a number of cases it is pursuing.

The company’s application notes that according to the ATO, these cases are potentially worth “A$1 billion a year.”

Chevron is seeking leave to appeal an April 21 ruling by the Full Federal Court of Australia that the terms of an A$2.5 billion loan ($1.8 billion) between Chevron Australia Holdings Pty. Ltd. and its U.S. subsidiary, ChevronTexaco Funding Corp. (CFC), didn’t meet the arm’s-length standard.

CFC had borrowed money in the U.S. at 1.2 percent and lent the funds to Chevron Australia at 9 percent.

Grant Thornton’s Asia and Australia transfer pricing services leader, Jason Casas, said Chevron’s appeal application was expected given the significant level of tax involved, “coupled with evidentiary grey areas” in the lower court decisions.

The application “highlights the critical nature of the case, being the first Australian transfer pricing case to consider financial transactions,” he told Bloomberg BNA May 26 by email.

Retroactive Transfer Pricing Application

The company’s application points out that the lower court judges relied on differing approaches and considerations to reach their conclusions, Casas said.

The application also “hits some core tax and transfer pricing principles,” including the retroactive application of transfer pricing rules in section 815-A of the Income Tax Assessment Act 1997, he said.

Chevron’s application notes that section 815-A was enacted in 2012 and was made to apply retroactively to income years beginning on or after July 1, 2004.

Consequently, Chevron was assessed for the 2006-08 income years based on criteria not known until 2012—and not known as a source of Australian law when the company ordered its affairs, Chevron’s application said.

‘Interpretational Issues’

Zara Ritchie, leader of BDO’s global transfer pricing practice, said the appeal application rests on “numerous interpretational issues.”

“The appeal points out that there is divergence of approaches of the primary judge and the two approaches taken in the Full Court, which leaves the transfer-pricing world in a somewhat uncertain state as to the outcome of proceedings and correct interpretation of the legislation,” Ritchie said.

“Although the legislation in question is now superseded, there are certain commonalities with the current legislation,” she told Bloomberg BNA May 25 by email.

Ritchie added that a draft risk assessment on cross-border financing recently released by the ATO “is likely to increase confusion among taxpayers as to the appropriate application of the transfer pricing legislation to cross border financing.”

Chevron lodged its application for leave to appeal on May 19. The ATO has yet to make a submission.

If the court accepts the case, it may consider just the written documentation, or it may also conduct an oral hearing.

No date has been set for the court to decide whether it will consider the appeal.

To contact the reporter responsible for this story: Murray Griffin in Melbourne at

To contact the editor responsible for this story: Penny Sukhraj at

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