Rio Tinto (ASX, LON:RIO), the world’s second-biggest miner by market value, will fight a A$447 million tax bill it received from the Australian government Wednesday, adding that the new assessment is not related to any tax avoidance scheme.
The amount, consisting of A$379 million plus interest of A$68 million, is linked to what is known as “transfer pricing” between Rio Tinto’s Australian operations and its Singapore office for the calendar years 2010 to 2013.
The practice, a tactic that allows firms to move profits to low taxing countries, is a common form of legal tax avoidance used by resources companies.
But Rio Tinto noted it voluntarily approached the Australian Commissioner of Taxation (ATO) more than 10 years ago seeking to confirm its pricing arrangements. The transfer price in dispute is in line with an outcome agreed to by the ATO years before 2010, the company added.
The ATO is also auditing 59 multinational corporations and hundreds of other companies to ensure they comply with the government’s new Multinational Anti-Avoidance Law, the Financial Review reported.
Such legislation, it noted, is focused on global businesses worth more than $1 billion that have company structures that allows them to evade having a taxable presence in Australia.
Rio said that while it will challenge the amended tax assessment, it has agreed to pay 50% this month.