MELBOURNE (Reuters) - Chevron Corp (CVX.N) has withdrawn an appeal to Australia’s High Court over a disputed A$340 million ($268 million) tax bill, leaving in place a landmark court ruling on related-party loans that could affect other multinational companies.
“Chevron Australia has reached agreement with the Australian Taxation Office on the loan transfer pricing dispute and have withdrawn our appeal to the High Court,” the company said in an emailed statement.
“Chevron believes the agreed terms are a reasonable resolution of the matter and are not expected to have a material impact on the year to date results of the company.”
The oil and gas giant and the tax office declined to comment on the size of the settlement.
With the appeal withdrawn, a Federal Court ruling remains in place, which found Chevron had underpaid taxes by setting up a A$2.5 billion intercompany credit facility offshore with an abnormally high interest rate, effectively lowering its taxable income within Australia.
The tax office estimates the court’s decision will result in more than A$10 billion in additional revenue being brought in over the next 10 years related to multinationals’ transfer pricing of related-party financing alone, the government said.
“Not only does this result put more revenue back to the Australian people, it also strengthens the ATO’s position in pursuing other arrangements where multinationals seek to dodge Australia’s transfer pricing rules,” Revenue and Financial Services minister Kelly O’Dwyer said in a statement.
Chevron did not say why it decided to drop its appeal to the nation’s highest court. It lost an earlier appeal in Australia’s Federal Court in April. The case covered the tax years from 2004 through 2008.
“The judgment in Chevron is one of the most important decisions in corporate tax in Australia,” an Australian Taxation Office spokesman said in an emailed statement.
The closely watched case is a first test of how Australia’s transfer pricing rules apply to interest paid on a cross-border related-party loan.
“We have been very clear that this case would have direct implications for a number of cases the ATO is currently pursuing in relation to related party loans, as well as indirect implications for other transfer pricing cases,” the ATO spokesman said.
The tax office declined to name which companies it may pursue.
($1 = 1.2665 Australian dollars)
Reporting by Sonali Paul; Editing by Richard Pullin