BHP, Rio Tinto questioned over Singapore marketing hubs

11 Apr 2015

Australian senators on Friday slammed BHP Billiton for not revealing how much profit it made or the taxes it paid at its Singapore marketing hub, as wider inquiry into profit-shifting by multinationals to avoid tax gathered pace.

Defending their use of marketing hubs in Singapore, Australia's biggest miners, BHP and Rio Tinto, said proximity to their Asian customers and access to a skilled marketing workforce helped them strike the best deals for the commodities they produced globally.

"The point is that the work that's undertaken in Singapore could not be sensibly taken elsewhere," Rio Tinto Australia managing director Phil Edmands told the Senate panel. "Singapore is seen as a neutral location between buyer and seller."

BHP turned down requests to reveal how much profit it made at its Singapore hub and declined to say whether the Australian Taxation office had issued a tax bill, otherwise known as a "position paper", for tax owed on the Singapore hub.

According to BHP's head of group tax, Jane Micihie, it was an ongoing process.

She added the company did not want to give a running commentary.  She said BHP was in talks with the tax office over transfer pricing applied to the Singapore hub.

However, both companies confirmed to the Senate tax avoidance inquiry that they are being audited by the Australian Taxation Office over the use of Singapore marketing hubs to allegedly reduce their tax bills.

Edmands told the inquiry that the company's Singapore hub made a $790- million profit and paid at a 5-per cent tax rate in 2014.

BHP, however, refused to reveal how much profit it generated in Singapore and the tax rate there, citing commercial sensitivity.

Michie also refused to answer repeated questions as regards receipt of a position paper from the Australian Taxation Office setting out how much tax was owed.

''You can't just not answer because you don't want to answer,'' inquiry chairman Sam Dastyari said. ''This is serious.''

Independent senator Nick Xenophon told Michie and BHP corporate affairs president Tony Cudmore, ''Your credibility is shattered by the fact your competitor is prepared to share those figures.''

Following a short adjournment the committee decided to give BHP the opportunity to answer the question on notice.

In the event it failed to do so, the matter might be referred to the full Senate for determination.