Tax Treaty Case Law around the Globe 2016

S. 185Chapter 15 Australia: Pricing Money – The Chevron Case

Graeme S. Cooper

15.1. Introduction

In October 2015, the Federal Court of Australia delivered a long and longawaited judgment in the transfer pricing case, Chevron Australia Holdings v. Commissioner of Taxation. It was a protracted and hotly contested battle, on an important issue for international tax, involving vast amounts of money and keenly followed both in Australia and overseas. The case is likely to have ongoing significance in forcing some clarification about the rules for the terms and pricing of debt used by multinational enterprises to fund their offshore operations.

The case was a behemoth – the parties argued in court for 5 weeks, which is almost unprecedented in Australian tax litigation, and the judgment of Robertson J extends beyond 200 pages. The Australian Taxation Office (ATO) won on all the major issues, though it lost on many of the secondary issues argued in the case. The taxpayer has already announced that it will appeal, which is probably not surprising given the amount of tax and penalties at stake.

15.2. Facts of the case

Chevron is a well-known oil and gas exploration and production multinational. The parent com...