Last night, ABC’s The Business ran a disturbing segment (above) explaining how global oil giant, Chevron, avoids paying Australian taxes on its Gorgon LNG project, depriving Australia’s governments of billions of dollars in taxes.
Below is the transcript of the report:
TONY EASTLEY: A giant multinational accused of being Australia’s biggest tax dodger is under fire again.
Chevron heads a consortium developing the giant Gorgon gas project off the north-west of Western Australia.
Its latest financial accounts reveal that it has added $7 billion to a controversial “in house” loan that critics have branded a tax avoidance scam.
Chevron however says it’s perfectly legal.
But there are fears that the arrangement could deny Australia billions of dollars of tax revenue.
Stephen Long has this exclusive story.
STEPHEN LONG: It’s one of the biggest resource projects in the world, and the promise was the vast Gorgon gas venture in Australia’s north-west would be such a revenue bonanza Australia could cut personal income tax rates.
That’s what the giant multinational, Chevron, maintained a decade ago. Now there are fears that as the finite gas reserves are exploited, Australia will gain little revenue at all, due in part to a controversial loan arrangement between two Chevron companies, that critics say is a vehicle for piping profits offshore.
JASON WARD: Well to me, I mean it really shows continuing contempt for the Australian Government and for the Australian people, this is clearly a tax scheme to avoid payments once profits start to flow on the Gorgon project and the Wheatstone project.
STEPHEN LONG: Jason Ward, a researcher with an international union body who’s spent years analysing Chevron’s tax affairs. He argues its Australian affairs are part of this rich tradition.
JASON WARD: Well essentially what happens is the Australian business, the primary Australian company, is owned by a shell company, a holding company in Delaware, and this actually the definition of a shell company.
It had a different name, it’s name was changed, it has no employees, it pays $175 in annual filing fees to the state of Delaware, and you know, it reduces taxes in Australia by paying interest payments to the company in Delaware, which actually doesn’t get taxed.
STEPHEN LONG: So they pay no tax on this money?
JASON WARD: On the money that they make on the loan to Australia they pay no tax. It’s a hybrid loan structure, it gets washed out in Chevron’s global accounts.
STEPHEN LONG: The scheme works like this:
On paper, Chevron’s local subsidiary borrows big money from a Chevron shell company registered in Delaware. Seven billion dollars was added to the loan last year, according to Chevron’s filings with ASIC, bringing the total to $42 billion.
The interest charge on that loan in the past year was $2.2 billion, but the debt’s not being repaid. Chevron is running it up to offset against the Australian tax bill on future profits from our gas reserves.
Chevron maintains the arrangement is a legitimate loan purely to fund construction on the Gorgon gas project. Sam Dastyari, who led a Senate inquiry into corporate tax avoidance, doesn’t buy it.
SAM DASTYARI: This is a rort. This has always been a rort and it continues to be a rort. In Chevron, we have the godfather of Australian tax minimisation and, dare I say it, tax avoidance.
MARK ZERNZACH: It does, in my opinion, look further tax dodging by Chevron, loading itself up with debt from the US tax haven of Delaware in order to dodge paying taxes here in Australia. It requires investigation by the ATO very thoroughly in my view.
STEPHEN LONG: Mark Zernzach from the Tax Justice Network.
MARK ZERNZACH: Chevron has had a long history of tax dodging. The issue here is that when large multinational companies get away with tax dodging, if that’s what they’re doing, then it really hurts the rest of us in the community. It means less money for things we want like schools and universities, and basically these companies are not contributing then to our society.
STEPHEN LONG: Last year, the Federal Court ordered that Chevron pay more than $300 million in back taxes after that ruling that another loan between Chevron companies was a tax-dodging ruse, using a non-commercial interest to transfer profits offshore.
Chevron is appealing against its finding. In a written statement, Chevron told the ABC that it abides by a stringent code of business ethics, under which it complies with all applicable laws and regulations.
It maintains that its Gorgon and Wheatstone gas projects are delivering Australia enduring benefits.
TONY EASTLEY: PM’s Stephen Long reporting.
If these types of projects deliver little in the way of taxes and royalties, one has to ask: where is the benefit to Australians?
First, the projects are primarily foreign-owned, so the profits flow offshore.
Second, other than the construction phase, there is little ongoing employment impact.
Third, these types of LNG export projects divert gas supply away from domestic users, in turn forcing-up the cost for both households and businesses.
At least WA, like virtually all other gas exporting nations, has a domestic gas reservation policy in place, though it seems to have some enforcement problems. The East Coast should follow suit with an improved version to prevent further gouging of the resident population.
