Rio Tinto has reached an agreement with the Australian Taxation Office (ATO) to settle a number of long-running disputes for a total of almost $1 billion.
The disputes were in relation to Rio’s use of Singapore as a marketing hub for its products as well as the interest on a borrowing used to pay an intragroup dividend in 2015.
Rio confirmed that it would pay an additional $613 million in tax covering the period between 2010 and 2021 on top of $378 million already paid to the ATO.
ATO deputy commissioner, Rebecca Saint, said that the settlement, which ranks one of the largest in Australia’s tax history, was a “very good outcome” for the Australian tax system.
“Even prior to this settlement, Rio has been one of Australia’s largest payers of income tax for many years, with a strong track record of engaging with the ATO in relation to its tax affairs, albeit with some areas of dispute,” she said.
“Rio have announced that the settlement agreed to, has secured approximately $1 billion for the Australian community for past years, over and above their tax returns originally filed.”
The agreement between Rio and the ATO, which covers transfer pricing related to products including iron ore and aluminium, also extends through to 2026.
“This means that additional profits from the sale of Rio’s Australian-owned commodities will be taxed in Australia in the years to come,” said Ms Saint.
“The resolution of these matters means that ordinary Australians can have confidence that even the biggest companies are held to account to pay their tax due.”
An agreement has also been reached between Rio Tinto and the Inland Revenue Authority of Singapore (IRAS) in relation to transfer pricing over the same period.
“We are glad to have resolved these longstanding disputes and to have gained certainty over future tax outcomes relating to our Singapore marketing arrangements,” commented Rio Tinto CFO, Peter Cunningham.
“Rio Tinto remains committed to our commercial activities in Singapore and the valuable role played by our centralised commercial team.”
The settlement was welcomed by the federal government, which dubbed it as a win for everyday Australians and the nation’s commitment to tax fairness.
“Expecting local firms to compete against tax‑dodging multinationals is like asking them to fight with one hand tied behind their backs. It’s just not fair,” said Assistant Minister for Competition, Charities and Treasury, Andrew Leigh.
“Closing multinational tax loopholes will create a better environment for productive firms to flourish, and add to the public confidence in our tax system.
“The Labor Government will move to implement the specific profit‑shifting measures we took to the election. We are also working closely with like-minded countries to implement the OECD/G20 Two Pillar Agreement as swiftly as possible.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.