Guidelines on ‘marketing’ hubs were released without fanfare and cannot be found on the ATO’s homepage

This article is more than 3 years old

This article is more than 3 years old

The Australian Tax Office has given resource and energy giants 12 months to declare the income from their “marketing hubs” in Singapore after chief executives from BHP Billiton and Rio Tinto claimed they did not engage in aggressive tax planning.

But the International Transport Workers’ Federation has called on the ATO to consult the public about the deal, saying too few voters know about it.

The tax office quietly released final guidelines last week for multinational corporations with Australian operations that use “marketing hubs” in Singapore, a low-tax jurisdiction.



Marketing hubs have come under the spotlight after the ATO raised concerns about the level of profits being funnelled through them. Chief executives from BHP and Rio have argued the hubs are legitimate ­businesses that provide quality services to customers in Asia.

As part of last week’s guidelines the tax commissioner, Chris Jordan, gave mining and energy giants 12 months to prepare for the introduction of a new regulatory regime by which Australian tax authorities will judge their offshore hub operations.

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He also offered them a 12-month reprieve from financial penalties if they declared the income from their marketing hubs for the past four years.

“In recognition that this is the first time that the commissioner has publicly released guidance in relation to hubs and to encourage willing and cooperative compliance going forward, the commissioner, for a limited time, is willing to remit penalties and interest if certain pre-conditions are met,” the ATO guidelines said.

“If you choose to take no action regarding your back years, you will be subject to the usual compliance approach for those years.”

But the guidelines on hubs were released without fanfare and cannot be found on the ATO’s homepage. They can be located on the legal database page of the ATO’s website, titled PCG 2017/1.

Jason Ward from the International Transport Workers’ Federation has told Guardian Australia the guidelines are a positive development but the tax office must better inform the public about them.

He said the ATO needed to explain how the waiving of financial penalties for recent potential transfer-pricing breaches could affect government revenue. “The broader Australian community needs to be consulted, not just the multinational resources companies,” Ward said.

“The implementation of these guidelines should be put on hold until the ATO explains the full impact and outlines any concessions granted to companies, including the waiving of penalties.

“Given tens of billions of dollars flow from Australia to Singapore in related-party transactions from companies like Chevron, BP and Shell, the amount of revenue at stake is enormous.”

The ATO’s guidelines on marketing hubs form part of a broader clampdown on profit-shifting by mining and energy companies, with the ATO preparing for a $30bn-a-year natural gas export boom in Australia over the next few years.

Its guidelines warn oil and gas companies not to use their Singapore hubs to “inappropriately shift profits” from Australia when that occurs.

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According to documents tended to the 2015 corporate tax avoidance inquiry, five of Australia’s major oil and resource companies made inter-party transactions worth up to $20bn between their Australian and Singaporean operations in 2014.

But oil and resource executives told the inquiry Singapore was the region’s main trading and refining area so trading hubs were necessary. They also said they did not use their Singaporean hubs to market Australian-sourced products.

BP said the value of its crude oil transactions over the past five years ranged between $9bn and $13bn a year between its Singapore hub and its Australian operations. It rejected suggestions it used offshore operations to shift profits overseas.

“The average net profit margin of BP Singapore over the last five years is 0.2%,” it said in its submission. “In fact, in one year, BP Singapore returned a loss in excess of $100m. This demonstrates that BP Australia is not allocating profit to Singapore or any other country.”

Shell said the value of its related-party sales between Singapore and Australia was $512m in 2014. It said Shell Australia also transacted with Shell holding companies in Bermuda, Luxembourg, the Netherlands and the UK.

Chevron told the inquiry it generated $944m in sales from its Singapore operations in 2014.

ExxonMobil said it generated $1.9bn net revenue from its Singapore operations, the majority of which related to the supply of trading stock and raw materials.

Viva Energy Australia said the value of its related-party sales between Singapore and Australia was $3.65bn in 2014.

The ATO’s guidelines come as the Turnbull government considers introducing a “Google tax” to stop technology companies artificially diverting profits overseas.

Companies, and the lawyers and accountants that represent them, are already pushing for the draft legislation to be watered down to include carve-outs for companies with good tax track records.