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Chevron loses case against $340m tax bill

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April 21, 2017

Chevron Australia could be forced to pay over $300 million to the tax office after it lost an appeal

Chevron Australia could be forced to pay more than $300 million to the tax office after it lost an appeal to the full Federal Court challenging assessments over five financial years from 2004 to 2008.

The assessments related to interest paid by Chevron Australia to its United States subsidiary Chevron Texaco Funding Corporation, with the Australian Taxation Office arguing the company had reduced its liability by shifting profits offshore.

The assessments were made on the basis that interest paid by the Australian company was greater than it would have been under an arm's length dealing between independent parties.

"Chevron will pay more than $300m to the ATO proving the govt's program of tax avoidance funding and new measures is working," Treasurer Scott Morrison tweeted after Friday's ruling.

A Chevron spokesman says the energy giant will review the decision "to determine next steps which may include an appeal to the High Court of Australia".

"As recognised by the trial court in the dispute, the financing is a legitimate business arrangement and the parties differ only in their assessments of the appropriate interest rate to apply," the spokesman told AAP in a statement.

KPMG tax partner Grant Wardell-Johnson says the "critical case" will affect transfer pricing analysis in Australia and globally.

"This is a substantial win for the (taxation) commissioner, and many taxpayers will need to review their transfer pricing methodologies," Mr Wardell-Johnson said in a statement.

"The court held that in applying the arm's length test for a multinational, one does not postulate that a subsidiary is completely independent of its parent.

"Rather you must take into account the common ownership in determining the appropriate consideration."

Michael Sukkar, the assistant minister to the treasurer, says the federal government is "very pleased" that $314 million could now be recovered from Chevron.

"This is just another step in the government's repeated attempts and commitment to ensure corporates who are operating in Australia are paying appropriate levels of taxation," he told reporters in Melbourne.

"This sets a precedent for other taxpayers."

Chevron Australia on Friday said that since 2009 the company had paid almost $4 billion in federal and state taxes and royalties.

It claimed to be "one of Australia's largest investors and employers".

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