BHP Billiton has revealed the true extent of its sweetheart deal with tax authorities in Singapore and acknowledged that the Australian Tax Office is chasing it for $500 million in unpaid taxes and fines in relation to the so-called "Singapore sling".
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The global miner, once referred to as "the big Australian", is paying an effective tax rate of just 0.002% - effectively zero - on the hundreds of billions of dollars in sales of Australian resources it directs through its Singapore "marketing hub".
Between 2006 and 2014, the company booked profits of $US5.7 billion in Singapore, it said in a statement to the Senate inquiry into corporate tax avoidance. BHP executives refused to answer the same questions when they appeared at recent public hearings, citing commercial confidentiality.
The company said it paid just $US121,000 in tax in Singapore – a paltry $US15,000 a year – after striking a special deal with the trade-friendly Asian nation to locate its marketing arm there.
The Senate inquiry has heard how marketing hubs, established in recent years by the major miners, allow products dug up in Australia like iron ore and coal to be "sold" to their own division in Singapore before being sold on at a mark-up to China and other nations.
Billions in sales can then be taxed at Singapore's low rate – or zero in the case of BHP – rather than at the 30 per cent corporate tax rate demanded by Australia.
"The Singapore government has granted BHP Billiton Marketing AG [Singapore] a tax incentive for its marketing activities. BHP Billiton Marketing AG was awarded this incentive for its contributions to the development of Singapore's commodities sector," BHP Billiton said in its statement on Monday.
BHP appears to have cut a better deal than rival Rio Tinto. Phil Edmands, Rio's Australian chief, told the committee its Singapore marketing hub earned $US719 million last year and paid $US44 million in tax – a rate of 5 per cent.
Between 2008 and 2014 Rio booked profits of $US4.5 billion in Singapore and paid $US234 million in tax there. The company paid no tax to Australia on Singapore-based sales.
BHP insisted that its Singapore division had contributed $US945 million to Australia in eight years.
"It is important to note that 58 per cent of the profit which BHP Billiton Marketing AG earns in Singapore from the on-sale of commodities acquired from Australian entities controlled by BHP Billiton Limited is subject to tax in Australia at the company tax rate of 30 per cent," it said.
Monday's statement angered members of the Senate committee who battled to get BHP to outline its tax affairs in open hearing.
Independent Nick Xenophon said a "pensioner with a part-time job" paid more tax than BHP did through its Singapore deal. "If any of this was money from their Australian operations then it is money we've missed out on for schools and hospitals in Australia," he said.
Greens leader Christine Milne said the Abbott government must confront the issue of widespread tax avoidance in his second budget.
"We do not need to wait for the other countries to act. This year's budget is the test: will the Prime Minister go after the real leaners, the big corporations, or will he confine his tax cheats rhetoric to those who are on welfare?" she said.
Since establishing in Singapore, BHP owes the ATO an additional $522 million as a result of tax assessments.
That consists of $301 million in additional tax, interest of $145 million and penalties of $76 million.
"BHP Billiton has objected to these assessments," the company said.
During a supplementary hearing of the tax avoidance inquiry last week Tax Commissioner Chris Jordan blasted BHP, Rio and other multinationals for providing selective evidence to the committee on their effective tax rates that "obscured" their aggressive approach to minimising their bills.
The companies, including Apple, Google and Microsoft, have been recalled to front the inquiry again to clarify their evidence.
BHP also revealed it gave $4.25 million to the Minerals Council to fight the Rudd government's proposed mining tax after it directly spent $4.2 million trying to torpedo the tax.
