Chevron blasts tax judgment
A top Chevron executive says a tax ruling against the energy giant will affect investment in Australia and dramatically change the rules for inter-company lending.
Chevron is considering an appeal to the High Court after losing a Federal Court appeal against being forced to pay up to $340 million to the Australian Taxation Office for assessments from 2004 to 2008.
The assessments related to interest paid by Chevron Australia to a US subsidiary, with the tax office arguing the company had reduced its liability by shifting profits offshore.
Chief financial officer Patricia Yarrington expressed “huge disappointment” at the court’s decision, saying it deviated substantially from recognised international practice.
“And in those guidelines, the courts are to treat related parties to a transaction as if they were standalone separate legal entities,” Ms Yarrington told brokerage analysts.
“I’d say that there’s an awful lot at stake with this ruling, not just for Chevron but for any inter-company lending in Australia and more broadly around the globe, because it fundamentally changes established transfer pricing principles.
“So if the ruling stands, it’s certainly going to affect any future investment in Australia.”
Aside from an appeal, Ms Yarrington flagged possible settlements with the tax office and “any other reasonable resolution”.
Chevron had more welcome taxation news, in regard to a Federal Government inquiry on Friday choosing not to recommend major changes to the petroleum resource rent tax.
Oil and gas multinationals had been accused of exploiting PRRT deductions to avoid paying tax in Australia.
“Any changes that are contemplated will be prospective, which is exactly what our position was ... you can’t go back and change the rules of the game after the investments are made,” Asia Pacific exploration and production president Stephen Green said.
“We look for stability of fiscal terms and conditions that we invest under to be maintained over the life of those investments.”
He said a solution to Australia’s emerging east coast energy crisis would demand significant capital investment.
“Australia is appropriately trying to find the right balance between fiscal needs in government and preserving what has been a very, very successful regime for attracting large capital investment, especially in our sector,” Mr Green said.
Chevron's Wheatstone LNG project.