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BHP in $1bn fight with Aust tax office

AAP logoAAP 20/09/2016 Prashant Mehra

BHP Billiton has vowed to fight a $1 billion claim by the Australian Taxation Office for taxes owed on Australian iron ore and other minerals sold through its controversial Singapore marketing hub.

The escalation in the battle between the global miner and the ATO comes as BHP revealed the value of taxes and other payments to governments around the world almost halved last financial year, as a prolonged downturn in commodities prices weighed on profitability.

The ATO has made a claim for $537 million in payments owed for the period FY2009 to FY2013, BHP said on Wednesday.

Previously the tax office had already assessed the company's liabilities for FY2003 to FY2008 at $362 million.

In addition, BHP has received a demand for $117 million relating to the Minerals Resource Rent Tax for FY2013, taking the total bill to $1.02 billion.

"BHP Billiton does not agree with the ATO's position. We have objected to all of the amended assessments and intend to continue to defend our position, including by initiating court action if necessary," the company said in its annual payments to governments report.

BHP, along with other multinationals including Rio Tinto, Apple and Google, has been under investigation for more than a year over the use of Singapore-based marketing hubs to allegedly reduce their tax bills.

While the miner is subject to an average tax rate of 30.3 per cent in Australia, it pays no tax on the marketing operations in Singapore.

The increased tax demand comes as the ATO steps up its scrutiny of multinational tax avoidance. The federal budget in May outlined a new taskforce led by the ATO, and tighter rules to close loopholes exploited by multinational companies, in an effort to raise up to $4.35 billion over the next four years.

Prime Minister Malcolm Turnbull named the treatment of tax liabilities by multinational companies as a priority at this month's G20 meeting in China.

BHP's chief financial officer Peter Beaven defended the use of the Singapore hub, saying it was a legitimate, standalone business with a central location.

"Asia accounts for 72 per cent of our revenue, so our marketing business for minerals is headquartered in Singapore," he told reporters.

"Its a great location close to our customers, it has excellent local skills and, of course, it has an attractive tax rate."

Meanwhile, BHP's payments to governments around the world halved last financial year.

It paid $US3.7 billion ($A4.9 billion) in taxes, royalties and other payments to governments in the countries it operates in, down from $US7.3 billion in the previous year.

Mr Beaven said the decline reflected lower profits due to lower commodity prices.

BHP suffered a record full year loss of $US6.39 billion after plummeting oil and iron ore prices and the Samarco mine disaster wreaked havoc with its bottom line.

The company said of the total payments, it paid nearly two thirds, or $US2.52 billion, in Australia alone.

Its global adjusted effective tax rate was 35.8 per cent in 2015/16, up from 31.8 per cent in the previous year.

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