By Nassim Khadem From Financial Review

Glencore is under audit by the Australian Taxation Office for the low level of taxes it pays, claiming billions in “losses” overseas and resorting to low-tax or no-tax nations such as Bermuda, Singapore and the Cayman Islands.

The Swiss-based mining giant revealed it was being investigated by the ATO in its response to questions from the Senate inquiry into corporate tax avoidance. As a result of previous tax audits, it has paid an additional $42 million in tax, Glencore said.

Responding to additional questions by Greens Senator Christine Milne taken on notice after the inquiry’s hearing in Melbourne, the company said it moved $US9 billion ($11.3 billion) in sales to “related parties” offshore in 2014, up from $10.7 billion the year before.

“As part of one of the world’s largest natural resource and agricultural commodity production and marketing businesses, Glencore Australia has a large number of international related-party transactions,” Glencore’s Australian regional finance chief Nick Talintyre explained.

The transactions into low-tax and no-tax nations such Bermuda, Singapore, the United Kingdom, Cayman Islands, Barbados, Kazakhstan and the Republic of Congo, involved sales and purchases of commodities and raw materials such as coal, copper, grains, oil seeds and cotton. There were also related-party deals over technical and administrative services and the provision of insurance.

Glencore said it “is not practical to identify the exact number of these related-party transactions,” adding that its international related-party transactions were disclosed in its annual international dealings schedule, which forms part of its annual income tax return.

Glencore is among other miners, including BHP Billiton and Rio Tinto that have revealed at the inquiry that they are under audit for the use of hubs in the low-tax nation of Singapore.

During the Senate inquiry’s hearing in Melbourne, Glencore had revealed it made a $US1.4 billion loss in Australia for the 2014 financial year. The company posted $US13 billion in revenue and paid $77 million in tax. Mr Talintyre said the company did not consider Singapore a tax haven, but rather a “trading hub”.

In his written statement to the Senate Economics Committee, he said now: “We currently have one ongoing Australian Taxation Office (ATO) tax audit and two objections against amended assessments issued following ATO tax audits”.

“We are working with the ATO to resolve the matters in dispute. With respect to the tax objection matters, $42 million of tax has been paid pending resolution of the matter.”

Mr Talintyre had admitted at the hearing that Glencore had inherited a Singapore marketing hub via its acquisition of Xstrata, but wouldn’t say how much money had been sent through there.

In his latest response, Mr Talintyre said Xstrata’s coal marketing business has been integrated into Glencore’s global coal marketing, and the Australian company would now sell its coal directly from its Australian operations to end customers. As Glencore was closing the Singaporean coal marketing office, existing sales contracts with end customers would be transferred to the Australian company for a “nominal amount.”

He said directors of the Glencore’s Australian companies were “well aware of their obligations as directors including specific responsibilities with respect to corporations legislation, taxation, environmental and health and safety laws, and emissions reporting” and “exercise their independent judgement on such matters”.

But they also “to the extent permitted by law can and do take into account the interest of the parent company to ensure that its commercial objectives, policies and interests are advanced”.

“This is no different to any other large corporate group, whether wholly within Australia or multi-national, where directors of subsidiary companies report to senior management” of the company globally, he said.

For more on this story go to: http://www.afr.com/news/policy/tax/glencore-reveals-its-being-audited-by-ato-over-taxes-20150513-gh0g51
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