Wed, Sep 04, 2019 - Page 10 News List

Australian judge throws out A$92m Glencore tax case

The Guardian

Anglo-Swiss commodities group Glencore PLC has won a round in its war with the Australian Taxation Office, with a judge throwing out a A$92 million (US$61.9 million) bill relating to one of its Australian mines.

Federal Judge Jennifer Davies yesterday set aside three years of tax bills levied against Glencore over its claims for the cost of processing copper from its CSA mine near Cobar, New South Wales.

The case predates and is unrelated to Glencore’s failed attempt to stop the office using leaked information contained in the Paradise Papers to investigate offshore finance structures, including A$25 billion in currency swaps, but Glencore’s victory is a blow for the office in its attacks on complex transactions that take place between different members of the same corporate group, especially in the resources sector.

The office has stepped up its scrutiny of the industry, bolstered by a win against Chevron Corp in a 2017 case that set new benchmarks for how “transfer prices” between the different parts of the same multinational group should be calculated.

In the CSA case, the office objected to a change Glencore made in 2007 to the way the mine calculated the cost of processing done by another company in the group.

The calculated cost — which was 23 percent of a copper reference price listed on the London Metals Exchange — was deducted from the amount Glencore paid the mine, but the office disagreed, hitting Glencore with fresh tax bills for the years between 2007 and 2009.

The office told the court Glencore should have stuck with the previous method of calculating the processing price, which was based on an industry benchmark.

It also said the deal had not been done at arm’s length and had favored the Glencore company that bought the copper, located in tax haven Switzerland, over the Australian one that operated the mine, but Davies said that the arrangement made more sense when considering the volatile market for copper at the time.

“It cannot be said that the entry into a price-sharing contract was irrational, having regard to the benefits of such contracts and the market circumstances,” Davies said.

She ordered the office to pay Glencore’s costs.

A company spokesman welcomed the court’s decision.

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