BHP Billiton To Contest ATO Assessment

by Mary Swire, Tax-News.com, Hong Kong

07 April 2008

Autralian industrial concern BHP Billiton Limited has announced that it intends to challenge assessments by the Australian Tax Office (ATO) in relation to tax relief claimed on a project in Venezuela.

The ATO has issued assessments and is in dispute with BHP Billiton in respect of payments made pursuant to a plant completion guarantee which had been granted by BHP in 1997 to third party financiers of the Orinoco Project in Venezuela.

The dispute, which involves taxes paid in the income years 2001 to 2003, involves primary tax and interest (net of tax) of USD289.6mn (AUD316.9mn). The ATO is still considering whether or not to apply any penalty.

In a statement, BHP Billiton claimed to be "confident of its position" and stated that it intends to "vigorously defend the assessment".

The outcome of the dispute is unlikely to be known for some time, but BHP Billiton believes that the matter "is adequately provided for in the accounts".

In an earlier but still ongoing dispute, in December 2007, BHP Billiton announced that it was in dispute with the ATO concerning a AUD734 million claim for back taxes relating to a failed section of its business.

The ATO has issued assessments and is in dispute with BHP Billiton and its subsidiary company, BHP (Direct Reduced Iron) Pty Ltd with regard to capital allowances claimed in the tax years from 2000 to 2006.

BHP Billiton maintains that it is entitled to the tax relief claimed during this time in relation to Boodarie Iron (Australia), which ceased operations in August 2005.

However, the tax office insists that the company owes primary tax of USD336 million (AUD384 million) and interest (net of tax) and penalties of USD307 million (AUD350 million).

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