Rio Tinto Australia managing director Phil Edmands has hit back at claims by Tax Commissioner Chris Jordan that the miner isn't paying enough tax.
In a letter to the chairman of the committee heading the Senate inquiry into corporate tax avoidance, Labor senator Sam Dastyari, Mr Edmands responded to the tax commissioner's evidence last week that Rio Tinto was playing down a tax dispute with the ATO.
Speaking at the inquiry's second round of hearings last week, Mr Jordan said evidence by Rio Tinto and other multinationals at earlier hearings did not accurately reflect the reality that the level of taxes they paid locally was being fiercely contested by the ATO.
Mr Edmands had previously told the inquiry that Rio Tinto's Singapore hub made a $US719 million profit and paid a 5 per cent tax rate in 2014.
Mr Jordan last week said Rio's claim that this was a result of an arm's-length transaction was "the very question that we are robustly testing".
He said Rio had said it made a "small immaterial adjustment" on taxes paid to the ATO. "Although perhaps immaterial to Rio in an accounting sense, we note that it's substantial from our perspective, well in the order of over $100 million," Mr Jordan said.
But Mr Edmands, in the letter to Senator Dastyari, said Mr Jordan's assertion was "incorrect" as Rio Tinto had never used the words "immaterial".
Mr Edmands clarified that he had said there was a "relatively moderate" adjustment, which it subsequently described as a "small amount, relative to our overall profit".
"Rio Tinto was not asserting that the amount of the adjustment was small in absolute terms, nor that it would be immaterial to the ATO," he said.
The description of the amount of the adjustment as "relatively moderate" and a "small amount, relative to our total profits" was "apt and correct".
"The amount of the adjustment was not material for the purpose of the Australian Stock Exchange listing rules, and so did not require disclosure under them," Mr Edmands said in the letter.
He said the exact amount of the adjustment was $107,049,372 and was in respect to a number of years, which amounted to about 1 per cent of the corporate tax paid in those years.
"The fact is we pay a huge amount of tax and have large dollar-value transactions, so our adjustments tend to be in the order of that magnitude," he said.
The reason Rio Tinto did not initially disclose the actual number in the hearings was because it has "confidentiality obligations owed to the ATO", and it was concerned that the "ATO would not favour disclosure".
"As indicated to the committee, Rio Tinto does not as yet have a position paper from the ATO in relation to the transactions which are under audit," Mr Edmands said.
He said Mr Jordan's comments regarding the Singapore profit not necessarily being the result of arm's-length pricing was "not totally correct".
"That profit includes profit earned on transactions between our Singapore commercial centre and third parties, as well as between our Singapore commercial centre and non-Australian businesses – neither of which are being tested," Mr Edmands said. "It also includes profits relating to transactions with Australian businesses that are not subject to audit."
The committee has asked Mr Jordan to clarify and expand on some of his statements made to the ATO.
Once he does, the committee will decide whether to ask Rio Tinto, BHP Billiton, Apple, Google and Microsoft to reappear before the inquiry.
