Rio Tinto, accused of using a Singapore tax sling to avoid paying Australian tax, has publicly released details of the taxes it paid in 2016.
The big miner say Australia got $US2.9 billion ($3.8 billion) in 2016, down about 12% from $US3.3 billion ($4.4 billion), the year before, for an effective tax rate of 29.6% on underlying earnings.
The payout is about 32% lower than in 2014, reflecting lower earnings from the slump in commodity prices.
Most of the latest tax and royalty payments, almost $US1.4 billion ($1.8 billion), went to the federal government, a drop from $US1.67 ($2.2 billion) in 2015. Another $US1 billion ($1.3 billion) went to Western Australia in 2016.
“Rio Tinto is a major contributor to society and we are proud of the economic activity and wealth we generate through taxes, royalties, employee wages, payments to suppliers and investment in communities,” says Rio Tinto chief financial officer Chris Lynch, releasing the company’s latest taxes paid report.
The Australian Commissioner of Taxation has hit Rio Tinto with an additional tax bill of $447 million, made up of $379 million plus interest of $68 million.
The bill is related to what is known as transfer pricing between Rio Tinto’s Australian operations and its Singapore office, sometimes known as a Singapore tax sling.
Transfer pricing, a way of moving profits to a low taxing country, is a common form of legal tax avoidance used by resources companies.
The federal government is cracking down on multinational companies booking revenue in other jurisdictions with lower tax rates.
Legislation, sometimes known as the Google tax, bringing in a 40% tax rate on multinational companies that use overseas tax havens to avoid paying tax in Australia, passed the Senate last month.
The Australian Tax Office is auditing 59 multinational corporations and hundreds of other companies to ensure compliance with the new Multinational Anti-Avoidance Law.
Rio’s Lynch says care must be taken not to inadvertently damage the investment environment by introducing tax reforms without proper consultation with industry and other stakeholders.
“In the specific area of natural resource taxation policy, we believe that it is essential for tax policy and design to take into account the cyclical nature of the industry and to respect agreements under which investment capital has already been committed,” he says.
“We support the Australian government’s policy to reduce the corporate tax rate. If Australia remains with a 30% corporate tax rate, this will come at a cost to investment and jobs, as other nations leave Australia behind.
Rio Tinto says it has pioneered the practice of corporate tax transparency, publishing its first taxes paid report in 2010.
“We publish this report on a voluntary basis, as part our commitment to tax transparency,” says Lynch.
He says the report is recognised as best-practice in tax reporting among multinational companies and the 2016 report, the seventh edition, underlines Rio Tinto’s commitment to transparency.
The majority of Rio Tinto’s taxes were paid in Australia ($2.9 billion), followed by Canada ($249 million), Mongolia ($215 million), Chile ($205 million), the United States ($102 million) and South Africa ($100 million).
Rio says the disclosures in the taxes paid report are consistent with the company’s support for the principles of the Extractive Industries Transparency Initiative.
The report also includes information required to be disclosed under the Australian Voluntary Tax Transparency Code and the UK Large Business Tax Compliance requirements.