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Friday, April 10, 2015

Rio Tinto exec works on tax inside Treasury amid ATO dispute

Rio Tinto exec works on tax inside Treasury amid ATO dispute Rio Tinto has reported more than $US3.6 billion in profits from its Singapore marketing hub in the six years from 2008 to 2013, on which it has paid less than 5 per cent tax Louie Douvis by Neil Chenoweth A Rio Tinto executive is working with Treasury to determine Australia's response to international profit shifting at the same time the mining giant is in dispute with the Tax Office over its aggressive tax planning in Singapore. Michael Potajko, a senior executive in Rio Tinto's tax arm, has been working for Treasury on secondment since 2013, at Rio's expense. Mr Potajko's former title was Specialist, Tax Risk Management, for the Asia Pacific region for Rio Tinto, a role which is likely to have involved working on Rio's Singapore marketing hub structure. The Australian Financial Review revealed on Tuesday that Rio has reported more than $US3.6 billion in profits from its Singapore marketing hub in the six years from 2008 to 2013, on which it has paid less than 5 per cent tax. Mr Potajko's job at Treasury involves direct contact with Australian Tax Office officials in committee meetings. Minutes for a Treasury-ATO technical working group on transfer pricing laws on August 25 last year show that Mr Potajko attended by phone as a Treasury representative, as ATO officers reported on current strategies to police transfer pricing abuses. Last week Rio Tinto chief executive Sam Walsh spoke against Treasurer Joe Hockey's proposed "Google tax" to pre-emptively tax multinationals that make profits in Australia but report profits in tax havens such as, in Apple's case, Ireland and Singapore. BHP Billiton has not seconded officers to Treasury, though its auditor, KPMG, has. National managing partner tax, Rosheen Garnon confirmed to the Senate's corporate tax avoidance inquiry on Thursday that KPMG was providing a staff member to work as part of Treasury's BEPS team, but denied he had any ability to affect government policy. Treasury deputy secretary Robert Heferen said that outsiders seconded to Treasury had to sign detailed non-disclosure agreements. Paul Suppree was Senior Assistant Commissioner in the ATO's international division when BHP Billiton appointed him Vice President, Tax, Risk and Reporting in May 2011. While he was not working with the team auditing the marketing hubs he had detailed knowledge of the ATO typical litigation strategies and negotiating tactics. It's believed he was involved in BHP Billiton's negotiations with the ATO over its tax assessment on its Singapore earnings. Last year he moved to the Corporate Tax Association as assistant director. He will be appearing in this position before the Senate inquiry into corporate tax avoidance on Friday afternoon, immediately before Rio, BHP and Glencore appear. Rio and its auditor PricewaterhouseCoopers were involved in a highly critical review released last year by the Inspector General of Taxation, Ali Noroozi, into how the ATO handles transfer pricing issues. Mr Noroozi selected a working group of advisors which included Rio Tinto exec Richard Atkinson, PwC partner Nick Houseman, and Michael Fenner of Chevron Oil. Chevron was involved in a Federal Court trial last year after the ATO claimed it cut $258 million from its tax bill by borrowing money in the US at 1.2 per cent and lending it to its Australian arm at 9 per cent. As Rio Tinto's auditor PwC advised on the complex company structure that the mining group set up in Singapore. PwC's Luxembourg branch was also the lead auditor in almost all of the LuxLeaks documents that the Financial Review revealed last year, which included secret tax agreements for more 30 Australian companies in the grand duchy from 2004 to 2010. Mr Noroozi lashed the ATO for failing to implement all of the recommendations made by PwC Legal, in a 2008 report on the APA unit commissioned by the ATO. A third of the Australian Luxembourg tax deals were approved in 2008, but PwC says that PwC Legal functions as a separate entity to PwC. "There was no conflict of interest in providing advice to the ATO whilst also providing professional advice to clients," a PwC spokeswoman said. The ATO officer who commissioned the PwC Legal report now works for PwC, with Mr Houseman.

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