A Senate inquiry will investigate if Australia’s biggest miners have avoided tax using offshore companies

Image: Paula Bronstein / Getty Images.

Ahead of tomorrow’s Senate Inquiry into Corporate Tax Avoidance the AFR has a story about how two of Australia’s biggest resources companies reportedly used transfer pricing practices to avoid paying tax in Australia.

The inquiry — which will hear evidence from the Australian heads of companies such as Apple, Google and Microsoft — will investigate Australia’s current tax laws and determine whether greater transparency is needed to halt multinational tax avoidance.

Today’s AFR revelations will be embarrassing for Australia’s biggest miners, given they too will be appearing before the senate inquiry tomorrow.

The AFR reports that from the early 2000s BHP Billiton and Rio Tinto — the nation’s biggest taxpayers — began running marketing operations out of Singapore.

From 2008 BHP and Rio mines were selling iron ore to Singapore instead of directly to Chinese and Japanese steel mills.

The repricing operations are similar to the way Apple’s Irish marketing business marks up and resells products made in China before they reach Australia and Europe. However, the Australian resource companies do this in reverse. BHP and Rio sell ore to the marketing hubs at the wharves, even though it’s not needed in Singapore.

There’s more on that here.

Last week Treasurer Joe Hockey said the government was determined to go after companies which do not pay legitimate levels of tax in Australia and that the ATO had embedded officials in major companies to understand how to go about it.

NOW READ: This is Google’s case for sending profits made in Australia offshore