In a battle between the Australian Tax Office (ATO) and Chevron in the Australia federal court, the US supermajor lost and will have to pay more than US$232 million (A$322 million) in back taxes, in addition to fines.
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Wheatstone. Image from Chevron Australia. |
The Aussie federal court ruled against Chevron, stating the company wrongly shifted profits offshore through transfer pricing, which minimized profits in Australia through the use of more than $2.5 billion in loans between Chevron’s US and Australian businesses.
The ATO’s lawsuit against Chevron stems between the years 2004-2008, for a scheme that the ATO said was designed to reduce Australian taxes by hundreds of millions of dollars.
“The Federal Court today handed down its decision on the appeal by Chevron Australia of interest deductions disallowed by the ATO for (2003 to 2007) tax years,” a Chevron spokesperson told The West Australian. “The Federal Court disallowed Chevron Australia’s appeal and Chevron Australia is considering the decision and its position with regard to any appeals. Appeals to the Full Federal Court must be filed within 21 days of orders issued by the Court with respect to the decision. Chevron does not intend to comment further while appeals are being considered.”
According to the International Transport Workers’ Federation (ITF), globally, Chevron reported stashing more than $35 billion in untaxed revenues in offshore accounts. The US government has not approved Chevron’s tax filings since 2008. Other oil producing nations have not approved Chevron’s tax filings for even longer.
“The ATO is now examining a similar $35 billion Chevron tax scheme. In light of this decision this audit is now the most important the ATO has ever undertaken,”Paddy Crumlin, ITF president said.“With LNG exports expected to triple in the next few years it is critical that tax authorities and governments take a very close look at how Chevron structures its’ tax arrangements.”
“It looks contrived, it looks artificial and it is shifting profit out of Australia,” Chris Jordan, ATO commissioner of taxation said. “Not to oversimplify it, basically, there was a borrowing of 2% by the US parent and an on-lending at 9%.”
Chevron in Australia
Chevron’s Gorgon liquefied natural gas (LNG) project in Western Australia is the largest resource project in Australia and the largest LNG project in the world. Gorgon is more than 90% complete, and gas from the project is expected to begin flowing this year, with an estimated annual post-tax operating cash flow above $8 billion from 2019-2032 and continuing above $5 billion per year until 2057.
The Gorgon Project is developing the Gorgon and Jansz-Io gas fields, located within the Greater Gorgon area, between 130-220km off the northwest coast of Western Australia.
It includes the construction of a 15.6 MTPA LNG plant on Barrow Island and a domestic gas plant with the capacity to supply 300 terajoules of gas per day to Western Australia.
The Gorgon Project is a joint venture between the Australian subsidiaries of Chevron (47.3%), ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).
Its Wheatstone project is more than 65% complete and is one of Australia’s largest resource projects.
The project will include an onshore facility located at Ashburton North Strategic Industrial Area (ANSIA), 12km west of Onslow in Western Australia’s Pilbara region. The foundation project includes two LNG trains with a combined capacity of 8.9 MTPA and a domestic gas plant.
Wheatstone is a joint venture between Australian subsidiaries of Chevron (64.14%), Kuwait Foreign Petroleum Exploration (KUFPEC) (13.4%), Woodside Petroleum (13%), and Kyushu Electric Power (1.46%), together with PE Wheatstone, part owned by TEPCO (8%).
Chevron’s North West Shelf Venture was Australia’s first LNG project. In 2014, the project celebrated 30 years of domestic gas production and 25 years of LNG cargoes to Japanese customers.
Located on the Burrup Peninsula near the Port of Dampier and the town of Karratha in Western Australia, the project is based on vast undersea natural gas and crude oil resources. It is currently Australia’s largest operating oil and gas development.
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