The ABC understands that the world's largest miner, BHP, could soon announce it has settled a billion-dollar-plus tax dispute with the Australian Taxation Office over its Singapore marketing hub.

Big miners, BHP and Rio Tinto, had in 2015 told the Senate inquiry into corporate tax avoidance that they were under ATO investigation for allegedly shifting profits through marketing hubs in Singapore.

BHP would not comment when approached about the possible settlement with the ATO.

The company has long argued that not only is it confident of its position, but that it is willing to head to court to fight the tax man.

"BHP does not agree with the ATO's position," the miner recently said in its annual Economic Contribution Report.

"We locate our business activities where value is created and do not engage in aggressive tax planning."

Why settle rather than fight in court?

For both large corporates and the ATO there is typically a stronger pull towards settling rather than fighting matters out in court, in order to get a quick resolution.

BHP does not want interest bills on any tax owed to keep increasing.

The miner has been hit with tax bills spanning 11 years — between 2003 to 2013 — that total $661 million in primary tax. When you add in interest and penalties, this takes the total to more than $1 billion.

For the ATO, being able to count money coming in, or about to come in, the door is a political winner — just look at recent media headlines saying the ATO is banking on collecting $5.6 billion from multinationals over two years.

The ATO's own data shows in recent years the agency has opted to settle on cases with companies rather than head to court.

It is believed the ATO usually collects about 70 per cent of the original tax assessment issued. But no one knows for sure, as figures are not published per settlement, but in aggregate.

In 2016-17 the variance between the amount the ATO originally sought from 36 large companies and what the agency eventually banked was $1.36 billion.

In the client group "public and multinational businesses" line, the variance between what the ATO sought from 61 companies and what it got after settlements was $1.44 billion.

This number could increase off the back of a possible settlement between BHP and the ATO.

How Singapore hubs work

The main issue under dispute is the margin on mark-ups for commodities sold to its Singapore operations, where the tax rate is 17 per cent but in years gone by has been legally reduced to zero or near zero thanks to generous incentives from Singapore's Government.

Marketing hubs established by the mining giants allow commodities dug up in Australia, such as iron ore and coal, to be sold to the companies' own operations in Singapore, before they are subsequently sold with a high mark-up to China and other nations.

BHP argues it is a commercial and legitimate operation. Tax Commissioner Chris Jordan has previously told parliamentary hearings that the mark-ups used by miners and others in transfer pricing cases are too high.

BHP has, according to standard practice, already made partial payments for these amended assessments. It paid $328 million, representing about 50 per cent of the primary tax.

The company said the primary tax in dispute represents less than 2 per cent of the taxes and royalties paid in Australia over that 11-year period.

Separate from the transfer pricing dispute is another dispute with the ATO that also relates to BHP's Singapore operations and a portion of profits attributed there. The ATO is also auditing the company for years 2014 to 2016, BHP said in the report.

Rio Tinto also fights its tax bill

BHP is not the only miner in dispute with the ATO over its marketing hub. In 2017 Rio Tinto revealed it had been hit with a tax assessment of about $500 million for the calendar years 2010 to 2013 after it voluntarily approached the ATO more than a decade ago seeking to confirm its pricing arrangements.

The assessment was, according to its April 2017 press release, for $379 million in primary tax, plus interest of $68 million (a total of $447 million at the time).

"The amended assessments do not relate to any tax avoidance schemes as confirmed by the Australian Tax Office," Rio Tinto said in that press release.

"No penalties are payable. The issue in dispute is the pricing of certain transactions between Rio Tinto entities based in Australia and the group's commercial centre in Singapore.

"Rio Tinto considers that its pricing is in accordance with the internationally recognised OECD guidelines and Australian domestic law."

The company said it would challenge the amended tax assessments — like BHP, Rio has already paid half of the amount the ATO says it owes — as it will result in double taxation.

ABC News contacted Rio Tinto, which said there was no update on the tax matter.