BHP Billiton, Rio Tinto Confirm Tax Probe

By Rob Taylor And Rhiannon Hoyle

SYDNEY--Miners BHP Billiton Ltd. and Rio Tinto PLC have become the latest corporate giants to clash with Australian lawmakers over claims of multinational tax avoidance, admitting Friday they were being probed by the country's tax office.

Just days after tech giants Apple Inc., Google Inc. and Microsoft Corp. faced tough questions from a special of parliamentary committee looking into their global tax affairs, some of the world's biggest miners--including Glencore PLC and local resources champion Fortescue Metals Group--were called to answer questions over alleged profit-shifting structures allowing potentially billions of dollars to be moved offshore.

But both BHP and Rio denied arranging their businesses to shift profits through marketing hubs in low-tax Singapore that were set up during a decadelong mining boom to facilitate the sale of minerals to customers across Asia.

"The critical point in relation to our Singapore commercial center--it wasn't set up to avoid tax," said Rio Tinto Australia managing director Phil Edmands.

Australia has followed other nations in Europe and elsewhere in seeking to close taxation loopholes allegedly being used by some of the world's biggest companies to divert profits to lower tax jurisdictions.

Australia's Treasurer Joe Hockey told The Wall Street Journal on Thursday that his coming May 12 budget would contain a "suite of measures" to clamp down on tax avoidance, amid expectations the government plans to join Britain in introducing a so-called Google Tax on diverted profits.

But the planned crackdown has been pre-empted by a coalition of opposition Labor Green and independent lawmakers, who formed a committee to probe executives from global mining, accounting and technology companies.

Facing the committee in Melbourne on the last of a three-day national hearing, Rio Tinto and BHP Billiton--which both have Australian and British roots--said they were in ongoing discussions with auditors from the Australian Taxation Office.

BHP, the world's largest miner--formerly known locally as "The Big Australian"--came under intense criticism over whether it was using its Singapore unit to minimize tax bills. It antagonized senators by refusing to reveal how much Australia's taxation office may be seeking as part of an audit process, or whether it had received an early assessment from tax officials, known as a "position paper."

"Your credibility is shattered by the fact your competitor is prepared to share those figures," independent senator Nick Xenophon told BHP's corporate affairs president Tony Cudmore, after the company cited commercial sensitivity for not revealing figures on its operations.

In a potential blow to the company's public image in Australia as a blue-chip stock champion, the committee's chairman, Labor Senator Sam Dastyari, had earlier threatened Mr. Cudmore with contempt of parliamentary laws requiring full disclosure. The company later agreed to provide written answers.

"This is serious," said Mr. Dastyari. "You can't just not answer because you have chosen not to answer."

Global resources giant Glencore earlier revealed it was closing its center in Singapore, while Mr. Edmands told the inquiry that Rio Tinto's Singapore hub made A$790 million profit and paid a 5% tax rate in the island nation in 2014.

Both BHP and Rio Tinto argued that their Singapore presence was critical for marketing iron ore, a key steelmaking ingredient, to Asian buyers.

"Our Singapore organization has deep analytical expertise," said Mr. Cudmore. "That is why our Singapore organization exists."

Write to Rob Taylor at rob.taylor@wsj.com and Rhiannon Hoyle at rhiannon.hoyle@wsj.com

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