Chevron – where to now?

Date: 18 August 2017

The withdrawal of Chevron’s appeal to the High Court against the decision of the full Federal Court largely in favour of the Tax Office is an important development. It leaves the position as enunciated by the Federal Court intact.

In substance, the Court found that the amended assessments issued to Chevron for the years 2004 to 2008 by the Tax Office were valid. The effect was that the interest paid by the Australian taxpayer to its related party offshore lender was greater than it would have been under an arm’s length dealing between independent parties. The excessive component would not be allowed as a deduction for the Australian taxpayer thereby substantially increasing the tax paid in Australia.

Professor Robert Deutsch, Senior Tax Counsel at the Tax Institute comments that, “Interestingly this resounding success for the Tax Office was decided under the old transfer pricing rules which have since been updated. The new rules are untested but are unlikely to worsen the position of the Tax Office. However, one can never be certain as to how new law might be interpreted and how exactly Chevron might fare under the new rules is unclear.”

Professor Deutsch added, “It would be the ultimate irony if the new rules were to be interpreted by the courts of the future in such a fashion as to give the Tax Office a less favourable outcome. This may seem unlikely but stranger things have happened in the world of tax.”

ENDS

For more information, please contact:

Professor Robert Deutsch, Senior Tax Counsel
Stephanie Conway, Media Relations Contact: 02 8223 0011

About The Tax Institute

The Tax Institute is Australia’s leading professional association and educator in tax. Its 12,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia. The Tax Institute supports the tax profession through education and professional development and works to continually improve tax law and its administration.