Chevron Australia Holdings Pty Ltd
This is the corporate welfare trifecta: zero income tax, crazy-generous exploration subsidies from the government and a free ride on its massive carbon emissions.
One of the world’s premier tax cheats, Chevron pays zero tax but still managed to siphon off a cool $920 million “return of capital” to its US parent – according to last year’s financial statements – besides ripping out $3 billion in finance charges to its associates offshore.
Australian taxpayers are effectively paying these guys to take our natural resources and pollute the planet. This US oil major is now possibly Australia’s biggest carbon emitter but, thanks to Australia’s extraordinarily generous exploration allowances in the PRRT, special to the oil and gas sector, its exploration credits have been compounding at 18 per cent annually. It’s like a free loan from the government.
So aggressive a tax cheat is Chevron that the Tax Office dragged it through the courts two years ago and won an historic case for “transfer pricing” of money. Having borrowed from itself (another Chevron company) in the US at 1.2 per cent, it had on-lent the money to its associate company here at 9 per cent.
Its latest accounts, audited by PwC, don’t show the upshot of the court case but they do show $31 billion in loans advanced to the Australian entity from related parties offshore, up from $3.8 billion the year before. This is the stock-in-trade of the tax-cheating US oil major; write yourself billions in loans and funnel the interest payments overseas so you don’t make a profit (which might be taxed) in Australia.
On top of that there is this: “During the year the group returned $350 million of capital to its parent company Chevron Australia Petroleum Company. Since December 2017, the group has returned further capital to the value of $570 million.” Almost a billion sent offshore.
How does Chevron manage to stay on the right side of the “thin cap” laws which stop excessive loans forcing profits offshore? It continually issues itself more shares to keep the debt-equity ratio within the limits. It issued another 6.9 billion shares during the 2017 year and 5.8 billion the year prior.
The operator of the leviathan Gorgon and Wheatstone gas projects in WA is now starting to make serious coin. Revenue from $1.6 billion to $4 billion in 2017 (the latest accounts) but naturally Chevron’s costs rose just as much. Besides the enormous interest payments on the debt offshore, it managed to somehow book a $2.7 billion foreign exchange loss. How does your company treasury lose almost three billion dollars?
Was it lost to a related party offshore, like the billions in interest and capital returns? So clumsy.
Depreciation costs jacked up from $757 million to $1.8 billion and Chevron also managed to book an income tax “benefit” of $768 million; another leg-up from the Australian taxpayer.
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We are counting down the Top 40 Tax Dodgers. There are now four years of tax transparency data published by the Tax Office and we have used this data to work out which large companies operating in Australia have paid the least tax, or no tax.
Notable new economy players such as Google, eBay, Booking.com, Expedia are not near the top of the ATO list. That's because they don't (yet) recognise all income earned here; instead, they book Australian revenue directly to their associates offshore. They will be ranked in due course.
For other large corporations, and in particular, multinationals, the main steps in avoiding tax are made by reducing their taxable as much as they can; usually by sending it offshore in interest on loans, "service" fees or other payments to foreign associates. So, we have set a threshold. We have included only those companies which managed to wipe out 99.5 per cent or more of their taxable income over four years.
Qantas, therefore, is not on this list, although it has enormous income and has paid no income tax in Australia for many years. It misses the cut-off due to it not eliminating more than 99.5 per cent of its total income.
The airline had made large losses which were offset against profits. Many large corporations which have paid zero tax in ATO data, have legitimately made losses and have therefore built up "tax-loss shelter".
Further explanation of methodology can be found here.
Many others however, such as ExxonMobil and EnergyAustralia, are on the list as they managed to eliminate all or most of their taxable income by "debt-loading" or other means of aggressive tax avoidance.
In this, the second iteration of michaelwest.com.au corporate tax rankings, we have ranked companies purely on the Tax Office data. We will also publish a list of Australia's better corporate taxpayers, those companies who contribute most to the country in which they operate.
The Tax Office data is not a perfect guide. It does not record refunds, only tax payable and is often at odds with disclosures made for accounting purposes. In some cases, there are multiple entities with the same ultimate offshore parent reporting. One entity may pay zero tax, another may pay at the statutory 30 per cent rate (even if on low taxable income). We endeavour to be fair in our reporting to recognise these issues.
The data also recognises trusts as well as companies. For trusts, it is the members (investors) rather than the trusts who are ordinarily required to pay the tax. In many cases however it is fair to recognise trust structures for what they are, as tax is often the main reason these vehicles have been structured as trusts.
Companies are welcome to debate their rankings or to touch base to clarify or defend their tax practices. We will append or link these submissions.
Hydrox has been taken off the list as it never made a profit.