Tax dodgy Chevron targeted

Tax evasion and avoidance by multinationals have been identified for decades as prime contributors to continuing global inequality.

The issue has been raised in institutions such as the Organisation for Economic Co-operation and Development (OECD) and the G20, because a global response is needed, given that national jurisdictions are involved, but progress has been painfully slow.

Now there is a new front in the fight to make multinationals pay tax where they earn their income.

A consortium of trade unions and nongovernment organisations (NGOs) last month launched a case in the Netherlands against fuel giant Chevron to compel it to pay its share of tax. Unusually, the case is not being brought before a court of law but being taken to the OECD, specifically the national contact point (NCP), a facility set up in each member country, which is being asked by the complainants to arbitrate the dispute.

The complainants are Dutch trade union federation FNV, the International Transport Workers’ Federation (ITF), Public Services International and IndustriALL Global Union, with support from the NGO Friends of the Earth.

The respondents are 14 Chevron companies registered at two Dutch addresses, one in Amsterdam and the other in Rotterdam.

FNV’s Lucia van Westerlaak says Chevron had been singled out partly because the ITF had research on its activities, although many other multinationals also avoided paying tax. Success in this case would mean that other multinationals could be pursued in the same way.

The issue is a serious problem worldwide, the complainants say in their filing. “The financial crisis played a key role in changing how governments and the public perceive corporate tax avoidance. As governments found themselves strapped for funds to support essential services and leaned more heavily on average citizens to make up the difference, policy-makers and interested citizens began questioning multinationals’ flagrant avoidance of their own tax obligations. The relation between tax avoidance and inequality and poverty has now become clear: tax avoidance guts public budgets, which decreases public spending on essential services such as schools, health clinics and infrastructure.”

The complainants say almost all multinationals avoid paying tax. “This specific complaint targets the Dutch subsidiaries and related companies of Chevron corporation because of the multinational’s fierce concealment of its tax-related information, its industrial utilisation of Dutch subsidiaries in tax-avoidance schemes, and the amount of tax revenue Chevron manages to avoid paying to governments around the world,” the filing says.

“Chevron is particularly active in protecting the opacity of its tax practices.


“Chevron has also been the respondent in several of the recent challenges by governments of corporate tax minimisation schemes. Indeed, over the last decade, Chevron has paid billions to settle tax disputes in many countries around the world.”

In April last year, Chevron faced a $300-million tax bill, one of the largest in Australian history, after losing a case brought against it by the Australian Tax Office, ABC News reported.

“Chevron has a truly multinational corporate structure, broken into three tiers across numerous countries around the world. Critically for this complaint, Chevron relies extensively on Dutch intermediaries to facilitate transactions that help it avoid tax payments,” the complaint led by the Dutch unions says. “At least 34 subsidiaries of Chevron are established in the Netherlands, some of which are the respondents in this complaint.

“These Dutch subsidiaries are typically finance or holding companies with no employees, no physical presence, and no business other than transactions with related parties. Most of the Chevron subsidiaries in the Netherlands are connected to or have been connected to a Dutch-based firm, Citco [Curaçao International Trust Company], one of the largest and most prominent trust companies that facilitates the creation of tax haven subsidiaries for many of the world’s largest corporations.”

The complainants say that Chevron is in breach of OECD guidelines for multinational enterprises. One states that enterprises “should ensure that timely and accurate information is disclosed on all material matters regarding their activities, structure, financial situation, performance, ownership and governance”.

Another requires the financial and operating results of the enterprise, intra-group relations and related party transactions should be disclosed, as should information on the enterprise’s policies relating to other matters such as taxation.

The complaint says Chevron’s Dutch subsidiaries have breached these disclosure guidelines in respect of their operations with Chevron’s Nigerian, Argentinian and Venezuelan business.

It says the OECD guidelines stress it is important that enterprises contribute to the public finances of host countries by making timely payment of their tax liabilities. “In particular, enterprises should comply with both the letter and spirit of the tax laws and regulations of the countries in which they operate.”

Van Westerlaak says the complainants expected the NCP would agree by year-end to arbitration, but they believed it was unlikely that Chevron would agree to participate.

Even if the overall finding favours the complainants, it is unlikely to result in any sanction against Chevron. But failure on its part to comply with the OECD regulations will mean that Chevron runs the reputational risk of operating outside of OECD-mandated guidelines.

Van Westerlaak says this had public relations implications for the image of the company. “It can lose respectability.”

Chevron could not be reached for comment at the time of publishing.

Following the publication of this article, Chevron’s Sean Comey contacted the M&G to say: “Chevron abides by all tax laws in the jurisdictions where we operate.

“Our approach to tax matches our efforts globally to conduct our business legally, responsibly and with integrity. Chevron has recorded total income tax expense of over $105-billion over the last 10 years and had an effective tax rate of over 39%.”

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Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote.

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