Peter Beaven, Chief Financial Officer, BHP Billiton
Originally Run in The Australian, 17 July 2015
In Glenda Korporaal’s piece published in The Australian on Wednesday 15 July, Rod McGeoch argues that a broader approach to responsibilities should be taken rather than ‘a narrow view that tax was just a cost to be minimised.’ At BHP Billiton, we agree. We are a global company that values our host communities, and we see our tax payments as just one part of the contribution we make to the communities in which we operate, including Australia. We are Australia’s largest taxpayer. We also contribute to the Australian economy through our payments to suppliers, wages, taxes and royalties. Last financial year this equated to around $27 billion. Of this, approximately $8.7 billion was taxes and royalties – representing an effective tax rate on our Australian operations of 30% (excluding royalties) or 45% (including royalties). BHP Billiton seeks to create sustainable value for our shareholders and for the communities in which we operate. That is why, in addition to our economic and operational contribution, during the 2014 financial year our voluntary investment in community programs totalled $263.1 million globally. In Australia alone, $89.6 million was invested in community programs, including projects focussed on small business development, education and training, health and environment.
BHP Billiton generates profits from creating a value chain: production (exploring, mining, drilling, extracting), processing, shipping and marketing. Value is generated at each step of this chain by the activities performed. We have marketing operations in Singapore – we have been very open about the functions of the marketing organisation based there and the reason for its location. Singapore is a global trading hub for many commodities and is close to the majority of our customers. It was not set up for tax minimisation reasons. We have hundreds of employees in Singapore who perform many important functions including customer sales, freight, credit risk and market forecasting for commodities like iron ore.
In 2014, BHP Billiton generated $16.2 billion of profit in Australia from the production and processing of Australian commodities – all subject to Australian tax. In the same year, our Singapore marketing organisation generated $1 billion in profits, mostly from the sale of Australian-sourced commodities but also from BHP Billiton operations in other countries. Around 58 per cent (in line with our dual listed ownership structure between Australia and the UK) of the profit generated in Singapore from the sale of Australian commodities is taxed back in Australia as a result of the Controlled Foreign Companies rules. Accordingly, almost 100 per cent of the profit from the sale of Australian commodities, from production to end customer, is subject to Australian tax.
BHP Billiton pays its fair share of tax both in Australia and the many other jurisdictions in which it operates around the world. We are committed to transparency and are proud to have been named the world’s most transparent mining company by Transparency International in 2014. Later this year we will release our first global tax and transparency report. In the meantime, we welcome informed public debate on this important issue.