Chevron to Appeal Australia Tax Ruling
May 19 2017 - 5:09AM
Dow Jones News
By Robb M. Stewart
MELBOURNE, Australia--Chevron Corp. (CVX) will launch a fresh
appeal in a roughly $250 million tax dispute tax dispute with
Australia's tax office, taking its case to the High Court.
Last month, the U.S. energy company lost an appeal in
Australia's federal court, which upheld an earlier judgement it
owed about 340 million Australian dollars (US$252.2 million) in
taxes, interest and penalties on a loan to its Australian arm from
a related company.
The landmark ruling was the first to reach an Australian court
that tested the application of transfer-pricing rules on interest
paid on cross-border inter-company loans, and has implications for
a number of other cases the Australian Taxation Office is
pursuing.
Chevron on Friday said it had elected to seek special leave to
appeal to the High Court on the financing dispute with the tax
office.
"As recognized by the federal court, Chevron Australia's
financing is a legitimate business arrangement and the parties
differ only in their assessments of the appropriate interest rate
to apply," a spokesman for Chevron's Australian business said.
The tax office, which had welcomed April's decision by a full
bench of the federal court, had also acknowledged Chevron had the
opportunity to apply to the High Court.
At issue in the case was whether a loan to Chevron's Australian
business was deemed arm's length. The tax office's transfer-pricing
rules were designed to ensure multinational companies don't obtain
a tax benefit from mispricing loans to their Australian
businesses.
The ATO claimed that Chevron Australia Holdings Pty. Ltd.
underpaid taxes for the 2004-2008 fiscal years by deducting
interest payments on a US$2.5 billion loan it received from Chevron
Texaco Funding Corp., a subsidiary set up in the U.S. by the
Australian business.
According to the appeal ruling, Chevron Texaco Funding was set
up to lend at about 9% interest from money it raised by issuing
commercial paper in the U.S. at a rate of about 1.2%.
In the decision, Judge James Allsop said the interest payments
created a tax deduction for the Australian arm of Chevron against
revenue from its stake in the North West Shelf natural-gas project
in Western Australia. The interest, as income in the hands of
Chevron Texaco Funding, wasn't taxed in Australia or the U.S., he
said.
Chevron Australia said it pays a substantial amount of tax in
Australia, including royalties, payroll tax, excise and other
imposts. Since 2009, it has paid about A$4.5 billion in federal and
state tax, the company said.
Chevron Australia also said its Gorgon and Wheatstone gas-export
operations are expected to make a significant contribution to the
economy when they are in full production.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
May 19, 2017 04:54 ET (08:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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