Thailand’s King Power loses retail bid in U-Tapao airport concession

MELBOURNE: BHP said it had signed an agreement with Australia’s tax authorities to settle a long-running dispute over the global miner’s operations in Singapore.

As part of the deal, the world’s largest miner is paying a total of about A$529mil (US$386.43mil) in additional taxes on income for 2003 to 2018, BHP said in a statement, adding that it had already paid A$328mil of that.

The settlement removes a thorn from the side of BHP which alongside fellow miner Rio Tinto was accused of not paying its fair share of tax as governments cracked down on multinationals in the wake of the global financial crisis. Both companies denied the accusations.

Tax authorities had been in dispute with both firms over the amount of Australian tax payable from sales of Australian commodities to their Singapore marketing businesses.

“It’s good to resolve, no admission of liability but small in the overall scheme for BHP,” said Rohan Walsh, a Melbourne-based investment manager for Karara Capital.

BHP had threatened court action after the Australian government earlier demanded it pay US$767mil in back taxes and penalties.

“This is an important agreement and we are pleased to resolve this long-standing matter,” BHP chief

Beaven said.

Additionally, BHP will raise its stake in BHP Billiton Marketing AG, which is the main company conducting the miner’s Singapore marketing business, to 100% from 58%.

The change in ownership would make all profits made in Singapore from Australian assets owned by BHP fully subject to Australian tax, the miner added.

“This is a landmark and precedential development in the execution of our marketing hubs strategy, and sends a strong signal to other industry participants,” the Australian Tax Office said in a statement. — Reuters financial officer Peter BANGKOK: Thailand’s Central Group and DFS Venture Singapore snapped up retail and services concession at an upcoming airport in the eastern province of Rayong, a government official said, beating out duty-free giant King Power.

The announcement underlines the challenges King Power is facing as its dominance of the lucrative Thai duty-free and travel retail industry comes under scrutiny, at a time when it is also trying to recover from the recent death of its chairman, Vichai Srivaddhanaprabha, in a helicopter crash.

“Central Group won the retail and services auction while King Power won the bid for duty-free,” Vice-Admiral Luechai Sri-eamgool, director of U-Tapao International Airport, said.

U-Tapao is the first airport in Thailand to hold an auction with multiple concessions, splitting up duty free and retail operations. Up until now, King Power has enjoyed near monopoly, being a sole operator with concessions in all major airports.

King Power’s most lucrative franchise in Thailand’s main international airport is under a single license that is set to expire in 2020. Auctions for concessions at Suvarnabhumi are slated to take place later this year.

Airports of Thailand Pcl, a state-owned firm that grants the concessions at major airports including Suvarnabhumi, may consider multiple concessions at the auction, analysts say, increasing competition among retailers.

Tourism is booming in Thailand, which received nearly 35 million visitors last year, most funnelled through the airports where King Power is ubiquitous. But public debate has increased over the single duty-free operator structure.

Bidders in the U-Tapao concession included Thailand’s Minor International and Korea’s Lotte Duty Free.

Under the 10-year concessions for retail, service and duty free at U-Tapao, operators must share at least 15% of their revenue with the government or the minimum guaranteed amount, whichever is higher, Vice Admiral Luechai said.

“The results will be submitted to the defence minister for approval with commercial activity to begin February 2018.”

King Power, which owns Leicester City football club, did not immediately respond to a request for comment from Reuters.

Yuwadee Chirathivat, chairman of Central Department Store, Central Group’s largest unit, said the consortium “was delighted” that the winning bidder would also be responsible for counters where tourists can pick up dutyfree items bought outside the airport.

While U-Tapao is smaller than Suvarnabhumi and Don Muang airports, upgrading the Vietnam War-era airport is at the centre of the government’s industrial policy in the east.

It remains a quiet airport with weekly international flights mainly to China, its website shows.

Bidding for a US$6.8bil high-speed rail project to link Suvarnabhumi, Don Muang and U-Tapao is underway. — Reuters