The $1 billion could build 17 new high schools like the one planned for central Sydney or a 400-bed hospital like the one opened in Bendigo in regional Victoria this year. The dispute could be the largest single corporate tax matter before the ATO. Credit:Karl Hilzinger Chevron's tax bill is a so-called "transfer pricing" matter and hinges on the rate of interest its Australian subsidiary pays on a $42 billion loan from its US parent to fund the massive Gorgon and Wheatstone LNG plants off the coast of Western Australia. The ATO is chasing multinationals that saddle their local operations with unreasonably high debt costs, thereby "exporting" profits via inflated interest payments to lower tax jurisdictions and avoiding Australia's 30 per cent company tax rate. In April, Chevron lost Australia's biggest-ever transfer pricing case and was ordered by the Federal Court to pay $340 million in taxes, penalties and interest.

That finding, which the company has vowed to appeal to the High Court, stemmed from a 2003 loan in relation to Chevron's part ownership of the North West Shelf gas project. In that case, Chevron Australia paid $1.84 billion in interest on a loan that cost Chevron Corp in the US just $110 million to service. ATO commissioner Chris Jordan. Credit:Andrew Meares Chevron revealed its latest tax dispute with the ATO in written answers to questions from the Senate's inquiry into corporate tax avoidance. "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 total difference in primary tax on all years currently in dispute is $1.062 billion," Derek Floreani, Chevron's general manager finance and compliance wrote. The company also stated that it had paid no company tax in five of the past seven financial years. In 2011 and 2012, Chevron paid an effective tax rate of 7 per cent and 8 per cent, respectively, less than a third of the corporate rate.

Its latest financial accounts lodged with the Australian Securities and Investment Commission show it had revenue of $2.1 billion in 2016. An ATO spokeswoman said Mr Jordan would not comment on individual taxpayers but "as a general principle" he expected all debts to be paid once an assessment is issued. "The commissioner expects that all debts, including those subject to dispute, will be paid on time," she said. If a company is fighting a ruling it is asked to pay 50 per cent of the outstanding tax bill until the matter is resolved. A Chevron spokesman said the company was "one of Australia's largest investors and employers".

"As recognised by the Federal Court, Chevron Australia's financing is a legitimate business arrangement, and the parties differ only in their assessments of the appropriate interest rate to apply. Chevron Australia pays a substantial amount of tax in Australia, including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax. Since 2009, we've paid about $4.5 billion in federal and state taxes and royalties," he said. Neither Chevron or the ATO would comment on how many tax years the $1 billion involves. Fairfax Media first revealed in 2015 that LNG producers like Chevron would not pay any federal royalty for at least a decade or more due to generous write offs available under the petroleum resource rent tax. A recent report to Treasurer Scott Morrison found LNG exporters would soon sell $50 billion a year in the resource without paying anything for its extraction. Chevron told the Senate committee that it expected to start paying PRRT from Gorgon some time between "2029 and the mid-2030s".

Offshore LNG projects are not subject to any state royalties. Follow us on Facebook