Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.
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.
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.
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 email@example.com
To contact the editor responsible for this story: Penny Sukhraj at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)