The Tax Justice Network is calling for a public investigation of ExxonMobil Australia’s tax affairs, saying the company has failed to disclose direct links to shell companies in the Netherlands and Bahamas, and that it uses related party loans to artificially reduce tax payments in Australia.
The tax advocacy group has released a new report, Is Exxon Paying a Fair Share of Tax in Australia?, detailing why Exxon’s opaque tax affairs are so concerning.
Public records released by the Australian Taxation Office show Exxon has generated revenue worth $24.5bn over the last three years without paying any corporate tax.
The company reported no taxable income and paid no corporate tax in the 2013-14, 2014-15, and 2015-16 financial years, despite reporting revenue of $9.6bn, $8.5bn and $6.7bn respectively.
The Tax Justice Network report says Exxon’s multibillion-dollar related party loans need to be investigated because they have received far less scrutiny than Chevron’s.
Chevron abandoned a high court challenge this year against the Tax Office. The dispute was over interest deductions claimed on a related-party loan worth $3.7bn. Chevron settled the case for an undisclosed sum, reportedly worth about $1bn, in what tax officials say was “one of the most important [cases] in corporate tax in Australia”.
The Tax Justice Network report says Exxon is “more aggressive” in pursuing extensive high-interest related party loans to artificially reduce tax payments in Australia than Chevron.
It says Exxon’s financial report shows it paid $574m in interest and finance charges to related parties and only $23m to unrelated parties in 2016.
“That is more than 96% of nearly $600m paid to offshore related party entities with virtually no disclosure of where the loans originated or what interest rates were charged,” the report says.
The report also draws attention to ExxonMobil Australia’s corporate structure.
It says the immediate owner of ExxonMobil Australia is not disclosed in its annual report, but a company search with the Australian Securities and Investments Commission reveals it is directly owned by a shell company in the Netherlands, and that shell company is owned by another subsidiary in the Bahamas.
“This appears to be a Caribbean variation of the aggressive tax-minimisation scheme commonly known as the ‘Double Irish with a Dutch Sandwich’,” the report says.
It says there was no mention of the Dutch ownership in Exxon’s submission to the Senate inquiry into corporate tax avoidance in 2015, despite being specifically asked to report on related party transactions with operations in foreign jurisdictions.
It says the company registry in the Netherlands shows the Dutch shell company is 100% owned by ExxonMobil Asia Pacific Holding Limited, which is registered at the same office in the Netherlands. A company profile of that company reveals it was incorporated in the Bahamas in January 2000.
“The Dutch entity is the local branch of the Bahamas-based parent company,” the report says. “This means that Exxon’s entire Australian operations are owned through a company in the Bahamas, via the Netherlands.”
The Tax Justice Network has called for a “public and transparent” investigation of ExxonMobil Australia’s tax arrangements. “The Australian people deserve answers about Exxon’s tax affairs in Australia,” the report says.
The Senate economics references committee was granted an extension this week for the corporate tax avoidance inquiry to continue until 30 May 2018.
The Labor senator Chris Ketter, who chairs the committee, says the committee will now consider if future hearings need to be organised, and it will write to Exxon inviting supplementary submissions.
Unions have been engaged in a long-running dispute with the Exxon subsidiary Esso and the contractor UGL over the wages and conditions at its Bass Strait operations.
In a statement to Guardian Australia, a spokesman for ExxonMobil said the company was now in a tax-loss position because of the substantial investments it was making.
“A corporate income tax loss is attributable to the significant investments being made in Australian oil and gas projects such as the Kipper Tuna Turrum project, Longford gas conditioning plant, Longford liquids pipeline and the Gorgon project in Western Australia,” the spokesman said.
“With a total investment of more than $20bn, of which 70% has been invested over the past five years, we are a substantial investor in the Australian economy.”
The spokesman also addressed the report’s claims about Exxon’s related party debts, saying money had to be borrowed from overseas because of the size of the projects.
“ExxonMobil Australia is making significant investments in the energy future of Australia. The sheer size of these investments makes it impossible to fund purely from the Australian operations, and therefore additional funding through loans from its affiliated entities is required.”
“The rates that ExxonMobil Australia pays for inter-company loans are calculated on an arm’s length commercial basis with rates comparable to what could be achieved on the open market.
“ExxonMobil believes that the global integration of its business lines and functional organisations allows it to capture significant value across the supply chain. As a result, ExxonMobil Australia’s subsidiaries have dealings with affiliates incorporated and operating in different countries, particularly as they seek or provide specialist advice and services.”
The spokesman also criticised the union’s protest against the company, saying it “continues to provide misinformation about ExxonMobil”.