That seems to indicate that the Plc side must have earned less than $US21.6 billion of the total $US136.8 billion in after-tax profits. While asset sales and extraordinary items distort the picture, the underlying position is that soaring iron ore sales made Australian operations hugely more profitable. The Plc operations? Not so much.

The surging Australian profits led directors to raise the dividend from US 13 cents in 2002, to $US1.24 last year. The Plc arm had to pay the same dividend rate, but where were the profits and cashflow to support this?

Before shareholders approved a formal change last November, the Australian arm was forced to loan money to the Plc side to make up the shortfall for the UK dividend payments.

BHP Billiton believes this is an artificial and unfair comparison, and that the dual-listed company must be seen as a whole, after an outstandingly successful merger.

However, an unprecedented leak of almost 40 years’ worth of documents has revealed the firm also facilitates massive money laundering, tax avoidance and criminal activity, including drugs and arms dealing CREDITS The International Consortium of Investigative Journalists Panamanian law firm Mossack Fonseca is one of the big three global providers of tax haven registry services Much of their work is for clients who have perfectly legal reasons for wanting to set up companies offshore Mossack Fonseca operates across 21 tax havens DATA JOURNALIST: EDMUND TADROS INTERACTIVE: LES HEWITT The Panama Papers The Panama Papers investigation by the International Consortium of Investigative Journalists, Süddeutsche Zeitung, Le Monde and dozens of media outlets around the world exposes how a network of big banks and law firms sell financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities, sports stars and more. Based on a trove of more than 11 million secret files, the investigation allows a never-before-seen view inside the offshore world – providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues. ABOUT companies, trusts and foundations intermediaries such as lawyers and tax advisors who directed their clients to use Mossack Fonseca’s services - 2.6 terabytes of information 14,153 from 1977 to December 2015 11.5 million documents The data includes information about 214,488 UK prime minister David Cameron’s (right) stockbroker father was a Mossack Fonseca client who used the law firm to shield his investment fund from UK taxes Mossack Fonseca employees worked in late 2014 to remove paper documents from its Nevada branch and delete computer traces of the link between the Nevada and the Panama operations, ahead of a US court order that it turn over information on 123 companies that Argentine prosecutors had linked to a corruption scandal involving an associate of former presidents Néstor Kirchner and Cristina Fernández de Kirchner (left) Associates of Russia’s president Vladimir Putin (right) secretly shuffled as much as $US2 billion through banks and shadow companies Employees of Mossack Fonseca destroyed and hid documents to mask the law firm’s involvement in Brazil's bribery and money laundering investigation, dubbed “Operation Car Wash”. So far the scandal has led to criminal charges against leading politicians and an investigation of popular former president Luiz Inacio Lula da Silva (right) British Virgin Islands authorities fined Mossack Fonseca $US37,500 for violating anti-money laundering rules because the firm incorporated a company for the son of former Egyptian president Hosni Mubarak (left) but failed to identify the connection, even after father and son were charged with corruption Note: There are legitimate uses for offshore companies, and we do not intend to suggest or imply that any individuals or entities included in the interactive were in violation of the law Family members of at least eight current or former members of China’s Politburo Standing Committee have offshore companies arranged though Mossack Fonseca, including president Xi Jinping’s (left) brother-in-law 8 Mossack Fonseca clients include… 61 associates of current or former heads of state 128 current and former politicians and public officials 29 Forbes listed billionaires China Li Xiaolin, daughter of former Chinese premier Li Peng (4) China Jasmine Li, granddaughter of former fourth-ranking official in Chinese Communist Party China France Patrick Henri Devillers, business partner of Gu Kailai, the wife of former high-flying Chinese politician Bo Xilai China Deng Jiagui, brother-in-law of Chinese President Xi Jinping Hong Kong Movie star Jackie Chan (5) Russia Rotenberg brothers - Boris and Arkady Rotenberg, childhood friends of Russian president Vladimir Putin Russia Sergey Roldugin, close personal friend of Russian president Vladimir Putin Syria Hafez and Rami Makhlouf, cousins of Syrian president Bashar Al Assad UK Ian Cameron, father of UK prime minister UK Pamela Sharples, Baroness and lifetime member of UK Parliament (6) UK Michael Anthony Ashcroft, former member of UK House of Lords UK Michael Mates, member of UK parliament Egypt Alaa Mohamed Hosni Mubarak, son of former president of Egypt Hosni Mubarak Malaysia Mohd Nazifuddin Mohd Najib, son of prime minister of Malaysia Najib Razak (7) Saudi Arabia Mohammad Bin Naif Bin Abdulaziz Al Saud, Saudi crown prince Malta Konrad Mizzi, Malta's minister of energy and health Argentina Soccer player Lionel Messi (8) Argentina Mauricio Macri, president of Argentina (1) Georgia Bidzina Ivanishvili, former prime minister of Georgia Iceland Sigmundur Davíð Gunnlaugsson, Anna Sigurlaug Pálsdóttir, Iceland’s prime minister Iraq Ayad H. Allawi, former prime minister of Iraq Jordan Ali Abu-Ragheb, former prime minister of Jordan Qatar Hamad Jassim J.M. Al Thani, former prime minister of Qatar Qatar Sheik Hamad Bin Khalifa Bin Hamad Al Thani, Emir of Qatar Saudi Arabia H.R.H. Prince Salman, King of Saudi Arabia Sudan Ahmad al-Nirghani, former president of Sudan United Arab Emirates Sheikh Khalifa Bin Zayed Bin Sultan Al Nahyan, president of the United Arab Emirates and Emir of Abu Dhabi (2) Ukraine Pavlo Lazarenko, former prime minister of Ukraine, convicted of money laundering, fraud and extortion Ukraine Petro Poroshenko, president of Ukraine (3) 2 3 12 current and former heads of state 1 4 5 6 7 DATA JOURNALIST: EDMUND TADROS GRAPHIC: LES HEWITT Document leaks Panamanian law firm Mossack Fonseca is one of the big three global providers of tax haven registry services Much of their work is for clients who have perfectly legal reasons for wanting to set up companies offshore However, an unprecedented leak of almost 40 years’ worth of documents has revealed the firm also facilitates massive money laundering, tax avoidance and criminal activity, including drugs and arms dealing Employees of Mossack Fonseca destroyed and hid documents to mask the law firm’s involvement in Brazil's bribery and money laundering investigation, dubbed “Operation Car Wash”. So far the scandal has led to criminal charges against leading politicians and an investigation of popular former president Luiz Inacio Lula da Silva (right) Argentina Mauricio Macri, president of Argentina Georgia Bidzina Ivanishvili, former prime minister of Georgia Iceland Sigmundur Davíð Gunnlaugsson, Anna Sigurlaug Pálsdóttir, Iceland’s prime minister Iraq Ayad H. Allawi, former prime minister of Iraq Jordan Ali Abu-Ragheb, former prime minister of Jordan Qatar Hamad Jassim J.M. Al Thani, former prime minister of Qatar Qatar Sheik Hamad Bin Khalifa Bin Hamad Al Thani, Emir of Qatar Saudi Arabia H.R.H. Prince Salman, King of Saudi Arabia Sudan Ahmad al-Nirghani, former president of Sudan United Arab Emirates Sheikh Khalifa Bin Zayed Bin Sultan Al Nahyan, president of the United Arab Emirates and Emir of Abu Dhabi Ukraine Pavlo Lazarenko, former prime minister of Ukraine, convicted of money laundering, fraud and extortion Ukraine Petro Poroshenko, president of Ukraine China Li Xiaolin, daughter of former Chinese premier Li Peng China Jasmine Li, granddaughter of former fourth-ranking official in Chinese Communist Party China France Patrick Henri Devillers, business partner of Gu Kailai, the wife of former high-flying Chinese politician Bo Xilai China Deng Jiagui, brother-in-law of Chinese President Xi Jinping Hong Kong Movie star Jackie Chan Russia Rotenberg brothers - Boris and Arkady Rotenberg, childhood friends of Russian president Vladimir Putin Russia Sergey Roldugin, close personal friend of Russian president Vladimir Putin Syria Hafez and Rami Makhlouf, cousins of Syrian president Bashar Al Assad UK Ian Cameron, father of UK prime minister UK Pamela Sharples, Baroness and lifetime member of UK Parliament UK Michael Anthony Ashcroft, former member of UK House of Lords UK Michael Mates, member of UK parliament Egypt Alaa Mohamed Hosni Mubarak, son of former president of Egypt Hosni Mubarak Malaysia Mohd Nazifuddin Mohd Najib, son of prime minister of Malaysia Najib Razak Saudi Arabia Mohammad Bin Naif Bin Abdulaziz Al Saud, Saudi crown prince Malta Konrad Mizzi, Malta's minister of energy and health Argentina Soccer player Lionel Messi Australian Financial Review Interactive Interactive graphic by Les Hewitt

Billiton structure

The leaked documents show a previously unseen side of Australia's biggest mining company. Billiton was set up in 1994 when Shell sold its downstream mining assets to two South African investment companies.

From the start the new structure was set up to be tax effective, with holding companies in the British Virgin Islands and elsewhere. A marketing arm was set up in Amsterdam.


When Billiton listed in Britain 1997 a UK holding company, Billiton Plc, was put in over the top of the British Virgin Islands and Netherlands companies.

Mossack Fonseca acted for only some of BHP Billiton's British Virgin Islands companies. Nedbank Private Wealth's Jersey office acted as an intermediary between Mossack and the mining company.

When BHP merged with Billiton in July 2001 it inherited the marketing team in the Hague and set up a marketing hub in Singapore in 2005.

The Australian Financial Review revealed in February that BHP Billiton earned $US5.7 billion in tax-free profits from 2006 to 2014 in its Singapore marketing hub (part of this profit was eventually taxed). The Singapore hub is a branch office of a Swiss company, BHP Billiton Marketing AG, which is where the $US5.7 billion in profits ended up.

In 2013 alone, this Swiss company paid $US1.4 billion in dividends, mainly from the sale of Australian minerals but also from other countries, to its immediate parent in the Netherlands, Billiton Marketing Holding BV.

This in turn paid dividends that ended up with BHP Billiton Marketing UK Ltd in Britain. British companies do not pay tax on foreign dividends received, so the payments were still untaxed.

Here the money stream split

BHP Billiton Marketing UK is 57.9 per cent owned by the Australian side of BHP Billiton, and BHPB Ltd paid "top-up" tax of A$945 million to the Australian Tax Office as the Australian share of the total Singapore profits from 2006 to 2014, under the Controlled Foreign Corporation laws.


But there was no tax burden for the other 42.1 per cent of the funds that went to two British Virgin Islands companies, then back to a UK company, and finally to BHP Billiton Plc, the British parent.

Virtually all of the Plc arm's profits go through these two British Virgin Islands companies – their 2008 accounts, for example, show profits of $US2 billion passed through on the way to the Plc parent.

"BHP Billiton does not engage in aggressive tax planning," a company spokesperson said. "Since the establishment of the British Virgin Islands companies each of these companies was, and continues to be, resident in the UK for tax purposes and therefore subject to UK tax on its worldwide income. Consequently, any profits made by these companies were taxable in the UK at the normal company tax rate."

In this case, it appears the normal tax rate was nil, because of the foreign source of the profits.

"In 2015, we paid US$7.3 billion globally in taxes, royalties and other payments to governments, of which US$5.2 billion was in Australia," the spokesperson said. "We are also committed to transparency. "

At the end of this long trail, BHP Billiton Plc paid out $US2.4 billion in dividends in 2013, of which the 42 per cent of the tax-free profits of the Singapore/Swiss marketing division came to just under $US600 million – or about a quarter of the total dividend to British shareholders.

It's not clear if all of these funds were streamed to the Plc parent or held in one of the subsidiaries, so the contribution to the dividend could have been less than a quarter. Then again, if Plc needed to borrow from the Limited side of the group to pay the dividend, then the proportion of cash earnings from Singapore might have been more than a quarter of Plc profits.

Profits for dividends


The Mossack Fonseca documents show large and complex transactions within BHP's many British Virgin Islands companies, which may reflect the need to create accounting profits in the Plc side of the group out of which dividends to shareholders can be declared.

What emerges from the mountain of Mossack Fonseca documents about BHP Billiton's companies is just how much paperwork is involved in running the offshore world – and how many opportunities there were for Mossack Fonseca to bill its big client.

In April 2005 a BHP Billiton wrote to Mossack about a "tight timeframe" to issue redeemable preference shares in BHP Billiton UK Holdings Ltd, a BVI company. Unfortunately there was the matter of an outstanding invoice for $US1,430, but once that was resolved Mossack swung into action.

In September 2005 a BHP Billiton exec wrote that there had been a typing error in the articles of association by BHP which stated that the interest rate for the pref shares was 0.5 per cent, whereas it was supposed to be the 90-day bill rate plus 0.5 per cent. This was unfortunate because the BVI company was issuing up to $US5 billion in pref shares, which meant the lower interest rate would make quite a difference.

It took months to fix, but it was a hiccup.

In 2011, BHP Billiton came within hours of missing a deadline to renew a mining lease in Colombia while Mossack Fonseca dickered over an unpaid bill which was eventually paid with a credit card over the phone. Another hiccup.

In May last year, trading had already begun in South32 shares after the group was spun off by BHP Billiton when Mossack Fonseca emailed to say there had been an unfortunate mix-up.

Two key BVI companies that were to be renamed to include South32 in their name had been mixed up and the holding company for some key mining assets now had the wrong name.


"This issue did not have any significant effect on the demerger transaction and when it was detected it was corrected," the BHP Billiton spokesperson said.

In the end the mix-up was fixed, but the blunder didn't help relations. Just days later, Mossack Fonseca did its probity check and uncovered the reports of BHP Billiton's $US25 million settlement on the Foreign Corrupt Practices Act charge and news reports of BHP Billiton's Australian tax dispute over Singapore.

Mossack's compliance division promptly earmarked a BHPB company in the British Virgin Islands for Enhanced Due Diligence.

This was not BHP Billiton's year.

Now read: The Panama Papers: BHP Billiton's face-off with Mossack Fonseca



