Oil and gas giant Chevron has settled a long-running transfer pricing dispute with the Australian Tax Office for an undisclosed sum, although the figure is likely to be well in excess of $1 billion.
Chevron had been planning to challenge the matter in the High Court but lodged a notice of discontinuance on August 15, a court spokesman confirmed.
The company’s decision to withdraw is a major win for the ATO and Australian government, which will collect billions of extra tax revenue from a range of other foreign multinationals as a result of the precedent set in this case.
Chevron confirmed it was discontinuing the challenge in a statement to The Australian Financial Review on Friday.
“Chevron Australia has reached agreement with the Australian Taxation Office on the loan transfer pricing dispute and have withdrawn our appeal to the High Court,” the company said.
“Chevron believes the agreed terms are a reasonable resolution of the matter.”
Chevron had been seeking leave to appeal a full Federal Court decision last August, which upheld an outstanding tax bill worth $340 million.
The bill relates to a $US2.5 billion ($3.7 billion) loan used to fund development of gas reserves off Western Australia.
However, Chevron and the ATO are in dispute over more than $340 million in tax and penalties.
In response to a question on notice by the Senate’s inquiry into corporate tax avoidance, Chevron confirmed its the amount in dispute over all years was $1.062 billion.
“Chevron Australia and the ATO disagree on how the law applies to determine the interest rate to apply to Chevron Australia’s financing arrangements,” the general manger of finance and compliance, Derek Floreani, wrote.
“The total difference in primary tax on all years currently in dispute is $1.062 billion.”
Clayton Utz partner Niv Tadmore said it was important to note that the matter dealt with in the Chevron decision related to old transfer pricing laws, which had since been updated.
“I would not be surprised if a case on the new regime – Division 815B – finds its way through the system all the way to the High Court in due course,” he said.