Chevron tax filings challenged by US tax authorities, report says

Chevron’s tax filings face repeated challenges from the United States and other global tax authorities, according to a new union-backed report that calls on world governments to crack down on the energy giant’s alleged profit-shifting tactics.

The world’s largest trade union body, the International Trade Union Confederation (ITUC), has called for a global investigation into Chevron’s tax schemes.

It said the US Internal Revenue Service had rejected the energy giant’s tax filings for the past seven years and that other world governments have done the same.

The ITUC’s general secretary, Sharan Burrow, said: “If Chevron avoids so much tax in Australia, imagine what they might do elsewhere.”

The battles with tax authorities appear to be confirmed in the company’s annual report, which states that “examinations of tax returns for certain prior tax years had not been completed as of December 31, 2014”.

In fact, the annual report states, Chevron has not had a filing approved in Nigeria since 2000, Angola since 2001, Saudi Arabia since 2012 and Kazakhstan since 2007.

“The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcome of these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain,” the company’s annual report, released in February, states.

“It is reasonably possible that developments on tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognised tax benefits within the next 12 months” but that “the company is unable to estimate the range of possible adjustments to the balance of unrecognised tax benefits”.

Chevron, which is set to be a major supplier of energy to the Asia-Pacific with its $US54 billion Gorgon project in Western Australia, has long been accused of using subsidiaries in Bermuda, Singapore and Delaware that allows it to avoid paying billions of dollars of tax locally.

The company, which has been in a court dispute with the Australian Taxation Office over the amount of taxes it pays locally, has denied claims it dodges tax.

In a submission to the Senate inquiry into corporate tax avoidance, Chevron Australia managing director Roy Krzywosinski said the company was forecast to contribute over $1 trillion to Australia’s economy over the next 25 years, create more than 165,000 jobs and deliver more than $380 billion in federal revenue through its projects.

A spokesman for Chevron told Fairfax Media: “Chevron abides by a stringent code of business ethics, under which we comply with all applicable laws and regulations in the countries in which we operate.”

But the ITUC report, launched late on Thursday and endorsed by the Tax Justice Network, said the energy giant had $US35 billion in untaxed profit stashed in offshore accounts.

The report, Chevron’s Tax Schemes: Piping profits out of Australia?, is being released at the Global Labour Tax Summit held at the International Labour Organisation (ILO) in Geneva.

It details how the company is under scrutiny by several tax authorities, including the Australian Taxation Office, for tax avoidance.

The report’s author, Jason Ward, a senior global strategist at the International Transport Workers’ Federation, said stronger anti-avoidance powers introduced by Treasurer Joe Hockey into Parliament on Wednesday were welcome, but would be unlikely to help the ATO win the case.

“The government’s Multinational Tax Avoidance Bill is a step in the right direction, but an initial read suggests that it won’t have any impact on Chevron’s latest tax scheme,” Mr Ward said.

“This scheme, like the previous one, relies on high-interest related party loans from Delaware. Australia must legislate additional changes to thin capitalisation rules to shut down this rort.”

Chevron in its 2014 annual report itself noted that “the tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world”.

It also revealed that it had set aside $352 million to settle the lawsuit with the ATO.

The Tax Office claims Chevron avoided paying $258 million in taxes by shuffling loans and other payments through various subsidiary companies and other related bodies.

Between 2004 and 2008, Chevron shifted $2.5 billion from the US tax haven of Delaware. The money was borrowed in Delaware at 1.2 per cent and lent in Australia at interest rates above 9 per cent, thereby allowing it to reduce its Australian taxable income.

Justice Richard Edmonds’ pending judgment in the case will determine how aggressively the ATO can pursue other Gorgon partners.

As detailed in a recent Australian Financial Review investigation, Chevron, ExxonMobil and Shell are headed for another showdown with the Tax Office over tax-free profits of up to $3 billion a year.

The Tax Office is investigating funding payments for the Gorgon project that will deliver estimated tax-free profits of more than $60 billion to the partners over the life of the development.

Chevron is one of a number of multinationals including miners BHP Billiton and Rio Tinto, and technology companies Apple, Google and Microsoft, that have come under fire for using subsidiaries and related companies to minimise their tax bills.

These companies have all recently been called before the Senate inquiry into corporate tax avoidance to explain their tax minimisation practices.