MELBOURNE, April 21 Chevron Corp lost an
appeal on Friday against the Australian tax office in a landmark
case in which the U.S. energy giant contested a tax bill of
A$340 million ($260 million), including penalties and interest.
The full bench of the Federal Court dismissed the appeal
against an earlier ruling that Chevron underpaid taxes by
setting up a A$2.5 billion intercompany credit facility with an
abnormally high interest rate which effectively lowered its
taxable income within Australia.
Chevron said it was disappointed by the judgment in the
case, which covers the five tax years from 2004 through 2008.
"We will review the decision to determine next steps, which
may include an appeal to the High Court of Australia," a Chevron
spokesman said in an emailed statement.
The case is a first test of how Australia's transfer pricing
rules apply to interest paid on a cross-border related-party
loan. It is being closely watched by multinational companies as
governments around the world clamp down on what they deem
elaborate means of reducing tax obligations.
"The economic effects of the internal financing structure
put in place ... included CAHPL's (Chevron Australia Holdings
Pty Ltd's) Australian taxable income being reduced by the
deductions it claimed for the interest payments it made to its
United States subsidiary," the court said in its latest ruling.
The Australian Taxation Office (ATO) said it was heartened
by the ruling but noted Chevron could appeal to the High Court.
"This decision is significant and has 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," an ATO spokesperson said in
($1 = 1.3293 Australian dollars)
(Reporting by Sonali Paul; Editing by Christopher Cushing)