- A tax dispute between Chevron (CVX) and Australia's government has the potential to cost the company billions of dollars, WSJ reports.
- The case deals with CVX's practice of financing its Australian operations with loans to its subsidiary in the country at interest rates that are much higher than market benchmarks; the arrangement boosts the Australian unit's costs, which in turn reduces taxable profit - in some cases, the difference in rates was nearly seven percentage points.
- CVX last month lost an appeal of a 2015 ruling in favor of the Australian Taxation office and said Friday that it is planning an appeal to the country's highest court.
- The case is limited to CVX's business dealings in Australia, and means the company owes a tax bill of ~$250M including penalties for the 2004-08 tax years, but an unfavorable ruling could cause a tax increase of $150M-$300M/year, according to a WSJ analysis.
- "There's an awful lot at stake with this ruling, not just for Chevron but for any intercompany lending in Australia and, more broadly, around the globe," CVX CFO Pat Yarrington has said.
- Now read: Chevron: Still Reliant On Asset Sales
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