The Turnbull Government welcomes the withdrawal of Chevron’s appeal to the High Court over the Australian Taxation Office’s assessment of $340 million in tax and penalties for interest payments made to related offshore parties.
Chevron sought to challenge Australia’s transfer pricing rules and the appropriate method for establishing an arms-length interest rate for a related party loan. The case also raised constitutional issues regarding transfer pricing provisions. The Full Federal Court upheld the ATO’s position in April this year. The withdrawal of the appeal means that the decision is now final.
While the Commissioner cannot brief me on any individual’s or entity’s tax affairs, the resolution of this matter is a significant win for the Australian community. The ATO’s initial estimates are that the Chevron decision will bring in more than $10 billion dollars of additional revenue over the next ten years in relation to transfer pricing of related party financing alone.
Not only does this result put more revenue back to the Australian people, it also strengthens the ATO’s position in pursuing other arrangements where multinationals seek to dodge Australia’s transfer pricing rules.
The resolution of this matter clearly demonstrates the Government is taking strong action to ensure multinational companies pay their fair share of tax on the profits they earn in Australia.
We have already provided an additional $679 million in funding to the ATO through the Tax Avoidance Taskforce to strengthen the ATO’s capabilities and ensure these multinational companies operating in Australia are held to account. The Taskforce is estimated to generate $3.7 billion from 2016-17 to 2019-20.
We are also taking action by further strengthening Australia’s tax laws. The Multinational Anti-Avoidance Legislation has brought $6.5 billion per annum into Australia’s tax base through the restructuring of corporate groups. More recently the Diverted Profits Tax will also put more pressure on these multinational companies to justify their international tax arrangements.