Thread regarding Chevron Corp. layoffs

Gorgon is not a single entity for tax purposes. The other owners (Shell and Exxon)have their own subsidiaries that hold their Gorgon interests. They pay their own taxes. They don't have this problem, they set their entities up correctly and didn't push the limits on their taxes hence no compliance problems. CVX needs new tax counsel. Shell and Exxon are very good at international tax and use every legal advantage they can, but do it without breaking the law.

Here is an analysis of the potential effects of this ruling and the path forward by the pending implementation by the ATO. A little more complicated then the coverage of the majority of the below posts.

http://mnetax.com/chevron-decision-means-australia-transfer-pricing-worldwide-20967

Regards,

This is corporate greed pure and simple. These tax advisors and their Deloitte cronies need to be behind bars

Chevron and virtually all large companies will employ creative finance tactics to lessen its financial burden. Don't blame Chevron alone. Don't discount the fact that Chevron has set aside the "tax savings" as it was incurred, not spent it. They do this just in case their tactic is disputed and they need to pay it back. If it's not contested within a certain legal timeframe, it's theirs to keep. This thing that Chevron did in Australia is its fiduciary responsibility to all its shareholders, not a rip off scheme. Think about it that way.

I hear chevron is also in arbitration for millions for setting up shell companies to avoid paying vat for equipment ordered on gorgon and Wheatstone The saga continues

Human Excrement

The ATO will investigate, audit and make a determination within the guidelines of the court decision. All 3 companies, Exxon, Shell and Chevron will be audited for any irregularities. The final answer from ATO will be many months from now, maybe not until next year.

Chevron, through its (presumably) Bermuda based subsidiaries, owns slightly less than 50 percent of Gorgon with Shell and Exxon each owning 25 percent. Is the Gorgon enterprise a single entity for tax purposes, or is it more like a partnership? Surely Shell and Exxon aren't "borrowing" monies from Chevron internal to Australia at the "FMV" rates established by Chevron for transactions between its various international subsidiaries - or are they? If not, the ABU's liability would only be the delta between its (disallowed) assumptions and the presumably allowed assumptions used by Shell and Exxon's Australian subsidiaries. Large projects, such as Gorgon and Wheatstone, depend on international financing and established stable tax treatment to determine an appropriate IRR for investors. Anti Chevron cheering aside, the ATO needs to be very careful not to reverse perceived stable tax policies and play in the political arena.

Bend over Chevron. This wont hurt a bit.

class action anyone?

Knife in the back - that's a good, but true point. Lots of solid employees stabbed by insecure coworkers and jealous managers. Their day is coming when Chevron loses again on Gorgon/Wheatstone and has to pay many billions in taxes. Money that the company does not have. Just borrow more and lay off more. Watch out for the knives.

If anything it is a shame Chevron is so conservative with finances. For years we had a AAA rating. It's nice to see creative accounting that tests limits. I am all for a bit more risk taking. Bring on the tax suits. As long as we win more than we lose its all good. Seems like the ATO has a weak argument.

How does it feel working for a bunch of thieves, you ask? I have years of walking with my back to the wall and holding my hand over my wallet in my back pocket. So far, 27 years with no knife in my back and no missing money in my wallet.

Nothing more than a den of thieves running this company. Stealing profits to avoid paying taxes, giving themselves big bonuses, playing golf during layoffs, promising dividends with stolen money, laying off thousands of employees, screwing the government and citizens of Australia and on and on. Remember all of this the next time you read or hear this company cheer leading about human energy, the Chevron Way, operational excellence and tenants of operation. All just lies and BS. How does it feel working for a bunch of thieves?

Ibid - Agreed! All my favorite mentors were forced into retirement. The company is changed, and I sold my stocks not desiring to support the remains. Moved on and done grieving my loss. I probably will never come to this layoff site again even. Thank you to those now retired or laid off too soon for your dedication.

Another example of the so called top, ethical company. And Chevrons employees have the balls to come on here and ridicule good honest people for losing their jobs??

Chevron might well be doing the same thing in Kazakhstan, but it is very doubtful that the taxing authorities over there would ever investigate. I wonder if any of the analysts will ask JW about this at the earnings call next week.

Is Australia the only Country Chevron did this in?

@viw Rubbish - your argument is mere ill-advised corporate spruik, spin and spoof.

The transfer pricing arrangement was a scam. The scammer was busted. Good job ATO.

Chevron Affiliate in Australia is Chevron Corporation in US. The affiliate is just a puppet.

I think the judges understood finance:

The outcome is somewhere between the last two alternatives. Chevron's key argument was that under the arms-length principle for transfer pricing, all it had to show was that if an independent party had loaned $US2.5 billion to Chevron Australia with no security, to be paid back in Australian dollars, then the interest rate would have been more than 9 per cent.

The fundamental change is that four Federal Court judges have now ruled that that's a lousy comparison, because Chevron Corporation in the US would always guarantee any loan.

Read more: http://www.afr.com/business/mining/chevrons-brazen-tax-defeat-will-rock-the-world-20170421-gvpcie#ixzz4ewMyWGg3

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Makes me think about Australia's laws on plain packaging for cigarettes, no one in the world thought we could get it done, now UK is set to go the same way - even when it went to the highest court of our land with the major tobacco companies. I say time to bring it on with the majors for transfer pricing using interest deductibility.

The Fed's cash has to find a home somewhere.

There are better returns on their loans than on their LNG plants.

I'm going to mimick Chevron's tactics starting next month. My wife will set up a shell company (called "Wifey"). Instead of going to my bank's ATM, I will borrow money from "Wifey" at a low 1% interest rate and then pay it back to my wife at 9%, who will then put it back it the bank account. I suppose I'll get a terrific credit after writing off the interest expense on my 1040 tax return next year. Thanks for the lesson in finance, Chevron. Learn from the best.

Some definitions of 'Shell Company' from different sources.

1 Investopedia: a shell company is a corporation without active business operations or significant assets. These types of corporations are not necessarily illegal, but they are sometimes used illegitimately. In addition to legal reasons, shell corporations act as tax avoidance vehicles for legitimate businesses. The number one reason for a domestic company to set up a shell company is to realize a tax haven abroad.

2 The Free Dictionary: A company that exists as a vehicle for transactions without any independent activities or assets. They can be used to obtain financing before they begin operations or after a bankruptcy. They are also used in tax avoidance and tax evasion schemes. For example, companies may set up shell subsidiaries in tax havens and hide profits in them.

So, what exactly is this business that Chevron has licensed in Delaware that has no building and no employees?

This court decision is in regard to the Chevron/Texaco merger. It relates to internal financing of Chevron Australia's debt to fund the acquisition of Texaco Australia after the global merger of Chevron and Texaco. Chevron (US) raised money for the loan at 1.2% and charged 9% interest to its nominal parent company, Chevron Australia Holdings Pty Ltd. The loan had the dual impact of significantly reducing tax paid by Chevron in Australia which could deduct interest payments from its taxable income, and allowing Chevron (US) to make profits from the difference between the borrowing rate of 1.2% and the lending rate of 9%. No tax was paid by Chevron in the U.S. on those profits. Chevron admitted in a 2015 Senate hearing on corporate tax avoidance that the current loan (Gorgon/Wheatstone?), which is under audit by the ATO, could reduce tax payments to Australia by $15 billion.

Way too many inflammatory terms ("money laundering", "shell company", "scheme") being posted on what s/b a straightforward issue. Chevron's Australian affiliate did not have the assets to use to secure a loan for the amount of money necessary to develop Gorgon. Chevron U.S. borrowed the necessary funds from U.S. banks at FMV interest rate. Chevron U.S. then lent the money to Chevron Australia at a higher interest rate based on Australia affiliate's prospect for future production. The only question is whether Chevron Australia (w/ no production and large construction costs to come) should enjoy the same lower interest rate that Chevron US w/ its broad asset base received from 3rd party banks.

Chevron has been allowed to take Barrow Island and do with it as it they see fit. The project there will be subsidised by the taxpayer for years to come with no revenue going back to the countries coffers and it seems that it is about time that they were put in their place. They are guests here, tax evading, visa manipulating guests but guests none the same and Barrow Island has not been changed to Chevron island, yet. Perhaps there will be clarity of what the government have allowed after the first major catastrophe.

So, Chevron is allowed to run a money laundering scheme through a shell company? What is this nonsense about fair market interest rates? Who decides what is fair? Another comment by a person on the corporate PR staff to deflect what is really going on - tax evasion.

That's assuming a lot of ignorance in our judges......

You are partly right. Chevron is allowed to do this but the dispute is over whether the interest rate paid was fair market or higher. Chevron is super clean financially and typically wins these disputes so I am sure they will appeal and prevail. The Australian judge probably doesn't understand international finance well.

It seems that Chevron set up a shell company in Delaware that provided loans to the ABU. The loan money actually originated with Chevron, the parent company. The shell company was merely a go between, or buffer between the parent company and the business unit. The business unit then would pay back the loan, with interest, to the shell company which transferred the money to Chevron the parent company. The business unit would then use the interest on the loan as a tax write off. So, Chevron was making loans, with interest, to itself and using the interest payment to offset taxes. Am I right with this assessment of what is happening?

Here is the AP news feed that just out this Friday morning:

CANBERRA, Australia (AP) — An Australian subsidiary of U.S. energy giant Chevron Corp. lost a court appeal on Friday against a 340 million Australian dollar ($260 million) tax bill in a ruling with ramification for how multinational corporations transfer money.

Three judges of the Australian Federal Court unanimously rejected Chevron Australia's appeal against tax assessments for five years ending in 2008.

So much for Human Energy!

As a country we trusted Chevron to efficiently develop our resources, in the hope that it would benefit future generations. How many billions of potential revenue have Chevron already lost due to their incompetence? When will they start sequestration of CO2 instead of pumping it into our atmosphere? Hope this is just the beginning....i have finally found a reason to love the ATO.

Chevron made loans to ABU through an office registered in Delaware that has no building and no employees. The annual registration fee is $175. The interest on the loan was paid back to Chevron. There are already multiple news websites reporting on this. It is a major story. The ATO is now targeting $42 billion in loans Chevron made to its operations in western Australia. Chevron is considering appealing the ATO decision to the highest court in Australia. The ATO has been fighting with Chevron for 15 years on the issue of tax avoidance.

Yes...a precedent has been set and a message has been sent.

Should post this on all the big players in this space, as they will be targeted next with this success by ATO!