Delay on Tax Office challenge to Chevron
A Federal Court hearing scheduled for Monday has been vacated, with a directions hearing now due on October 16.
The court case comes as the Tax Office tightens the net around multinational companies using aggressive tax strategies to move profit overseas.
The ATO's claims go back to 2003 and relate to inter-party loans between Chevron Australia and its US parent company, Chevron Corporation, following a restructure of the company when it merged with Texaco in 2003.
The loans went through an intermediary company called Chevron Funding Corporation, based in the US state of Delaware.
In an appeal statement last year, Chevron argued it had dealt at "arm's length" with the subsidiary, which handled $US2.5 million in loans from the US parent company to Chevron Australia. Chevron Australia repaid the loans with interest totalling $US1.5 billion between 2003 and 2007.
The case is expected to be the first big court battle between the Tax Office and a foreign multinational over transfer pricing rules, which relate to the prices charged in trade between different parts of a global business.
It is an area where the Tax Office has suffered big legal defeats in the past, prompting a tightening of the laws last year, which Chevron and other companies fiercely opposed.
The Tax Office has stepped up its offensive on corporate tax dodging, with a record number of audits of large or multinational businesses suspected of shifting profits overseas planned for this financial year.
Tax Commissioner Chris Jordan has said aggressive tax strategies such as those used by Google and Apple would be examined during his term.
Frequently Asked Questions about this Article…
The Federal Court hearing planned for Monday was vacated and the ATO must now wait until a directions hearing on October 16 to progress its legal challenge against Chevron over alleged tax-shifting.
The ATO alleges Chevron avoided millions in tax by shifting profits offshore, claiming issues stem from inter‑party loans between Chevron Australia and its US parent after the 2003 restructure.
The claims go back to 2003 and relate to loans routed through Chevron Funding Corporation (a Delaware entity); the article says $US2.5 million in loans were handled and Chevron Australia repaid loans with interest totalling $US1.5 billion between 2003 and 2007.
Transfer pricing refers to the prices charged in trade between different parts of a global business; this case is expected to be a major court battle over transfer pricing rules and could shape how the ATO enforces those rules against multinationals.
The Tax Office has tightened laws after past legal defeats and stepped up forensic action, planning a record number of audits of large or multinational businesses suspected of shifting profits overseas this financial year.
Chevron has argued in an appeal statement that it dealt at 'arm's length' with the subsidiary that handled the loans, defending the commercial terms of the transactions.
Yes — Tax Commissioner Chris Jordan has said aggressive tax strategies used by companies such as Google and Apple would be examined during his term, indicating broader scrutiny of multinational tax arrangements.
Investors should watch the directions hearing on October 16 and any rulings on transfer pricing enforcement, since outcomes and tighter ATO enforcement could influence regulatory risk and audit activity for large multinationals operating in Australia.
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