US oil giant Chevron faces $300 million tax bill in Australia

[David48atTD]

How many of these companies make more money manipulating paperwork than that from products built

Well ... one just got caught, and skinned.

US oil giant Chevron faces $300 million tax bill after ATO (Australian Tax Office) court victory.



Key points:

• Federal Court makes a landmark ruling on offshore profit shifting by multinationals
• US energy giant Chevron faces a tax bill in excess of $300 million, plus costs
• The decision likely to have implications for similar settlements the ATO is pursuing

Australian subsidiary not at 'arm's length' of US parent

The full court judgement related to an "internal refinancing" of Chevron Australia's debt to fund the acquisition of Texaco Australia after a global merger between Chevron and Texaco.

The loan, from a Chevron shell company, Chevron Texaco Funding Corp, charged a 9 per cent interest rate to its nominal Australian parent company Chevron Australia Holdings Pty Ltd.

The US Chevron company raised the money for the loan at an interest rate of just 1.2 per cent.

The loan had the dual impact of significantly reducing tax paid by Chevron in Australia, which could deduct interest repayments from its taxable income,
and allowing the US Chevron company to make big profits on the difference between the low borrowing rate of 1.2 per cent and the high lending rate of 9 per cent.

Yet no tax was paid in the US on the profits ...