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Australia: BHP Billiton, Rio Tinto 'ethically bankrupt' on tax

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Australia Financial Review

The push for a higher and broader GST is camouflaging the need to clean up "legally questionable and ethically bankrupt tax practices of some Australia's most senior corporate citizens", former Treasurer Wayne Swan has told federal parliament.

Railing against a new tax bill which seeks to carve out Australian-owned private companies from obligations to disclose tax information, Mr Swan particularly targeted mining giants BHP Billiton and Rio Tinto in a speech which implored larger corporate taxpayers to change an approach to tax obligations, which he says is depriving government coffers of legitimate revenue and distorting the tax reform debate.

Mr Swan said fighting against such practices was now a primary motivation for him staying in parliament.

The Senate Inquiry into Corporate Tax Avoidance has "drawn attention to the legally questionable and ethically bankrupt tax practices of some Australia's most senior corporate citizens".

"Tax avoidance on such a grand scale impoverishes us all", he said.

"When some companies fail to pay their fair share of tax, revenue must be found elsewhere – either from businesses, particularly the SMEs who already obey Australia's tax laws, or from individual taxpayers who already pay direct and indirect tax, including the regressive GST.

"The billions of dollars of tax that multinationals avoid holds back billions of dollars in health, education, and infrastructure investment and are being used to argue for a higher GST on an unwilling public. When multinationals avoid their tax obligations, one way or another, the Australian people pay."

"To tax avoiders, I say this: your transgressions have damaged your standing in the community, but your exposure provides an opportunity for redemption".

"Be true to the values you espouse in your Charters of Corporate Responsibility. Be transparent with your shareholders and with the Australian people about your tax liabilities."


The former treasurer said that "virtually every industry has its share of tax avoiders, from pharmaceuticals, to media and technology, to oil and gas companies", but he focused particularly on BHP Billiton and Rio Tinto.

The two big miners had treated "the Australian tax system and the Australian people with contempt", by both "blatantly inflating the impact of the Minerals Resource Rent Tax on their operations while funnelling their profits through foreign tax havens, or by pleading for a reduction in company tax despite paying effectively half the rate faced by honest Australian businesses".

Mr Swan highlighted "some of the schemes, which have tarred BHP and Rio as tax avoiders, but which their boards now have the opportunity to rectify", involving transfer pricing and controlled foreign company structures and withholding tax arrangements.

"That BHP and Rio have stretched Australia's tax laws is undeniable", he said.

"The impact of their evasion and aggressive minimisation is yet to be fully realised, but they're part of a scourge which has seen tens of billions of dollars in tax revenue funnelled out of Australia over the past decade."

"Despite this impropriety, the findings of the Senate Inquiry give these companies a chance to come clean, reform their practices and re-join the majority of Australian businesses who pay their fair share of tax in Australia.

"The challenge of cleaning up the corporate tax minimisation is being constantly camouflaged by those who will go to any lengths to impose a higher and broader GST on the Australian population – that's not reform or wealth creation, it's a recipe for lower growth and higher wealth concentration – and that's why ordinary Australians will never accept it."

A BHP Billiton spokeswoman said the company met all of its tax obligations. "Almost 100 per cent of the profit from the sale of Australian commodities, the entire length of the supply chain, is subject to Australian tax," she said.

"These payments totalled $8.7 billion, including taxes and royalties, in Australia in the 2014 financial year – which made us the country's largest tax payer."

The spokeswoman said BHP's Singapore marketing hub was not a means of avoiding tax. 

"Our customers are in Asia – so it makes sense for our marketing team to be based in Singapore supported by regional offices in key customer markets like China, Japan and India," she said. 

"The vast bulk of our profits come from the production and processing of Australian commodities in Australia and this is all subject to Australian tax.

In addition around 58 per cent of the profit generated in Singapore from the marketing activities associated with Australian commodities is taxed back in Australia under the controlled foreign company rules. The other 42 per cent of marketing profits belong to the UK side of BHP Billiton reflecting our dual-listed structure." 

Comment is being sought from Rio Tinto. 

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