Alcoa’s $1b tax fight

ALCOA of Australia faces a more tax fight than $1 potentially billion as a worth dech - ades-old bribery and corrup- tion scandal returns to haunt t the group.

Listed company Alumina, a, which owns 40 per cent of f Alcoa’s Australian operations, on Wednesday confirmed Alcoa of Australia had been hit t with a $214 million bill from m the Australian Taxation Office.

Alumina also flagged additional claims of $707 million in interest payments from the tax office, as well as the possible imposition of penalties that could tip the total amount under dispute to more than $1 billion.

The company did not detail the specifics of the ATO claims, but it is understood they relate to a long-running bribery scandal a decade ago.

That sca scandal d l centred t d on all legations Alcoa used a London-based middleman to pay bribes to executives at Aluminium Bahrain, or Alba, to win favourable contract terms on alumina sales from the company’s Australian operations.

In 2014, Alcoa pleaded guilty in the US to a bribery offence relating to the payment of kickbacks to Bahraini officials through a middleman. It paid $US223 million in fines to settle l the h case brought by the US Department of Justice, plus another $US175 million in “disgorgement of ill-gotten gains” to settle a related action brought by the US Securities and Exchange Commission.

In 2012, it paid $US85 million and entered into a longterm alumina supply contract with Alba to settle a racketeering and fraud lawsuit brought by the Bahraini company.

Alcoa was accused of using a middleman to pay tens of millions of dollars to former executives of Alba and Bahraini officials between 1989 and 2009 in return for a cut of contracts worth more than $US3 billion.

According to the SEC allegations, money used for the bribes came from commissions Alcoa’s Australian subsidiaries paid to the middleman, and “price mark-ups the consultant made between the purchase price of the product from Alcoa and the sale price to Alba”.

At the time of the US settlement, Alcoa said there was no allegation in the Department of Justice filings, and no finding by the SEC, that anyone at Alcoa “knowingly engaged in the conduct at issue”.

It is believed the ATO’S transfer pricing allegations centre around that difference in price, arguing Alcoa should have paid tax on the full amount paid by Alba rather than what it received from the middleman.

Alumina said Alcoa would defend the claims and it believed the sales “were the result of arm’s length dealings by AOA, and made at arm’s length prices to an unrelated third party that were consistent with the sales prices paid by other third party alumina customers at the relevant time”.

It is understood the “unrelated third party” refers to the middleman.

“Alumina notes that the ATO is seeking to assess tax on sales revenue which it contends that Alcoa of Australia (AOA) should have received, rather than the amounts actually received by AOA,” Alumina said in a statement.