BHP moves court to challenge $288m tax bill from Queensland treasury

Coal major BHP Billiton has moved court to solve the dispute over tax bills with the Queensland government. The company filed an application with the Queensland Supreme Court recently, relating to the royalty dispute over a $288 million tax bill between its joint venture with Mitsubishi and the state treasury.

An initial hearing by the Queensland Supreme Court on BHP's application has been scheduled for December 4. The mining giant is already under pressure after the deadly dam burst at its Samarco mine in Brazil.

Genesis of dispute

BHP said the BHP Billiton-Mitsubishi Alliance (BMA) in October received a tax reassessment demand for $186 million in royalties and $102 million in interest. The tax bill relates to the period between July 1, 2005 to Dec. 31, 2012, during the time BHP claims it paid around $2.4 billion in royalties to the Queensland government, reported Weekly Times Now, quoting an AAP report.

According to the mining major, at the core of the dispute is the basis for calculating the value of coal for royalty purposes under Queensland law. BHP calculates its royalties on the basis of first sale of coal to its marketing hub in Singapore. The state treasury, however, wanted royalties calculated on the basis of price at which the Singapore unit sells coal to the customers.

“We believe the Office of State Revenue is seeking to reassess royalty amounts based on retrospective laws as well as levy interest in excess of market rates on the disputed amounts," BHP's tax head Jane Michie said in a statement.

A spokesperson for Queensland Treasurer said he cannot comment on the specifics of the case.

“Given the matter is now before the courts it's not appropriate to comment on the proceedings at this time," Curtis Pitt told AAP.

The BMA joint venture is Australia's largest coal producer, with a declared capacity to produce more than 50 million tonnes of coal annually. Eight of its mines cover more than a quarter of Australia’s total annual coal exports.

Australian Probe

It may be recalled that BHP was facing criticism from authorities and politicians over its use of the Singapore hub to minimise tax payments in Australia.

The Australian Taxation Office is already investigating BHP, Rio Tinto, Apple and Google over their use of Singapore as a marketing hub, which it suspects as ruse to soften the tax bills. But BHP has defended the practice saying most of its Australian profits are taxed under Australian laws.

Dividend doubtful

Meanwhile BHP Billiton shares fell for a seven-year low on Friday, Nov.13, which was the weakest since the global financial crisis of 2008. It also raised concerns whether the company will shelve its policy of higher dividends.

The mining giant has been battered by sinking commodity prices, further compounded by last week's Samarco mine tragedy in Brazil, incurring millions of dollars in fines and penalties.

BHP stock crashed more than 3 percent to AU$19.81 in early trading, double the fall in the broader S&P/ASX 200 and is poised to fall more than 11 percent for the week, suggesting the biggest weekly fall since 2008.

BHP is known for its handsome dividend payout annually under a "progressive" dividend policy that endears it to investors. However, analysts speculate this will soon end as market forces and unexpected costs are biting hard on its balance sheet, reported Reuters.

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