18 August 2015
Peter Beaven, Chief Financial Officer, BHP Billiton
Originally Run in The Herald Sun, 18 August 2015
Our tax system continues to ignite debate among individuals, politicians, organisations and businesses – including the contribution from resource and other sectors to Australia’s bottom line.
As one of the largest tax payers in Australia for many years we welcome this debate. We are proud to support the economy through royalties, payments to suppliers and wages for more 20,000 Australians who for work for us in places as diverse as the Pilbara in Western Australia, the Bowen Basin in Queensland and Melbourne. In the 2014 financial year this contribution, including tax, was around $27 billion.
This month we celebrate the 130th anniversary of the incorporation of BHP – a company which grew out of the rich silver and lead deposit discovered by Charles Rasp in Broken Hill. You can imagine what the founders of BHP would make of their legacy and contribution, today.
As the world has advanced, our company has changed and become increasingly global. Like many large Australian companies today, BHP Billiton generates profits from creating a value chain. For us this includes exploration, production, processing and the sale and freight of products from Australia to markets all over the world, crossing a number of borders on the way.
Just as our company has evolved over the last 130 years, so have global tax rules. Income wasn’t even taxed in Australia 130 years ago. Today there are sophisticated tax rules and Australia has some of the most stringent rules in the world to ensure business pays its fair share. As a major global business, we also engage in policy discussions with major economies to make tax rules against profit shifting even more effective.
In the tax contribution debate, there has been some discussion on why BHP Billiton has a presence in Singapore with allegations from some that we set up our marketing operations to avoid paying tax in Australia. This isn’t true.
We locate our management and people as close as possible to our operations, plants, ports – and customers. For example, our Iron Ore division is managed from Perth and our marketing operations are predominantly based in Singapore, one of the great global trading hubs in the world, close to the majority of our customers. Our marketing organisation was not set up to avoid Australian tax. We have hundreds of employees in Singapore who perform critical functions - customer sales, freight, credit risk and market forecasting for our commodities including iron ore. Our customers are in Asia – so it makes sense for our marketing team to be based in Singapore supported by regional offices in key customer markets like China, Japan and India.
The vast bulk of our profits come from the production and processing of Australian commodities in Australia and this is all subject to Australian tax. What’s more, the profits we make on our marketing activities in Singapore are taxed back in Australia, through the Controlled Foreign Company rules. Around 58 per cent of the profit generated in Singapore from the marketing and sale of Australian commodities is taxed back in Australia under these rules. The other 42 per cent of marketing profits belong to the UK side of BHP Billiton reflecting our dual-listed structure. The fact is, almost 100 per cent of the profit from the sale of Australian commodities, from mine to customer, is subject to Australian tax – totalling $8.7 billion in taxes and royalties in Australia in the 2014 financial year.
Building on our long-running Sustainability Report, later this year we will also voluntarily publish how much tax we pay for each of our mining projects around the world. This reflects our commitment to paying our fair share and being absolutely transparent so we can have the sort of frank and honest debate we need to have about a range of policy issues in Australia - including taxation.