Page 18 - BHP Economic Contribution Report 2020

Approach to transparency and tax continued

Assurance regimes and relationships Tax agreements
with tax authorities As part of our commitment to corporate citizenship, we seek

BHP has an extensive set of systems and controls in place to to enter into agreements with revenue authorities about the
amount of tax we should pay on our activities, in particular,
manage our material and non-material risks. To address the risk on the pricing of intra-group transactions. This gives us greater
of material financial misstatement and to meet the legislative certainty about our future tax payments and reduces the risk
and regulatory requirements governing the internal controls of tax disputes with tax authorities.
over financial and other reporting in the countries in which
we operate, we have an internal control evaluation program. In relation to the pricing of our intra-group service charges,
as noted earlier in the Intra-group administration and technology
Each control is assessed annually to ensure it is designed section, the ATO and each of HMRC in the United Kingdom
appropriately to manage the risk. The controls are also subject and the Internal Revenue Service (IRS) in the United States
to a regular verification process to ensure they are operating have agreed to the pricing of these charges as part of bilateral
effectively. Each year, all material risks are assessed on the advance pricing arrangements. We also entered into an
basis of the effectiveness of their controls and given a rating, agreement with the ATO in November 2018 in relation to the
which is reported to senior management and to the Risk and Australian taxation treatment of our Sales and Marketing
Audit Committee of the Board. The internal control evaluation business as part of the resolution of the long-standing transfer
program also provides an annual external assessment of pricing dispute with the ATO in FY2019 (refer to the earlier
the effectiveness of internal controls over financial reporting, Our Sales and Marketing business section).
which is published in our Form 20-F filed annually with
the Securities Exchange Commission in the United States. Tax incentives
For more information on our internal control evaluation We have been granted tax incentives in some countries in which
program, refer to ‘Our tax strategy’ on our website at bhp.com. we operate. Where tax incentives are legislated and open to all
In addition, tax authorities conduct assurance on our tax qualifying taxpayers, we will accept them.
affairs in a number of different jurisdictions around the The criteria that apply to such incentives generally include
world. As part of our commitment to corporate citizenship, demonstration of a significant contribution to the local economy
we maintain positive and sustainable relationships with through a range of qualitative and quantitative measures, such
those authorities and seek to identify and, where possible, as local employment, investment and ongoing expenditures.
resolve any disagreements on a timely basis. In FY2020, the incentives that applied to BHP were in Singapore
Our risk ratings in the United Kingdom and Australia reflect and the Philippines. In Singapore, we were granted incentives
our size and complexity; our conservative approach to tax, exempting us from paying income tax on the profit from
in particular, not engaging in aggressive tax planning; qualifying sales and marketing activities (refer to the earlier
and our openness and transparency in our dealings with Our Sales and Marketing business section) and on profit from
revenue authorities. qualifying shipping operations (approximately US$20 million
In Australia, we have a Key Taxpayer risk rating. This risk rating profit in FY2020) until 30 June 2021 under the Maritime
reflects a lower risk level relative to other top 100 taxpayers, Sector Incentive – Approved International Shipping (MSI-AIS)
and an ongoing proactive and transparent engagement with Enterprise status. In the Philippines, we were granted an
the ATO. This is the lowest risk rating BHP can achieve as a top income tax holiday under a Registration Agreement with the
100 taxpayer. Philippine Economic Zone Authority (PEZA), which expires in
November 2021. Our income in the Philippines was US$26
BHP is part of the Key Taxpayer Engagement (KTE) approach million in FY2020 derived from the operation of our shared
being rolled out by the ATO. KTE is a continuous whole-of-tax Global Asset Services Centre. We also operate a shared Global
approach being put in place with 100 of the largest public Asset Services Centre in Malaysia, where we were previously
businesses in Australia. Additionally, like all large taxpayers granted an income tax incentive. This incentive expired in
in Australia, we are currently part of the ATO’s ‘justified trust’ September 2018 and the income derived in Malaysia is now
program. Under this program, the ATO is seeking to obtain subject to tax at the Malaysian corporate tax rate.
greater assurance that large corporates are paying the ‘right’
amount of tax in accordance with taxation laws. The ATO
has issued to BHP a Tax Assurance Report for FY2016,
FY2017 and most recently FY2018.
We received an overall provisional ‘High’ level of assurance
for FY2018.
Similarly, the business risk review rating given to BHP by
Her Majesty’s Revenue and Customs (HMRC) in the United
Kingdom includes ‘inherent moderate risk’ factors and
behavioural ‘low-risk’ factors.

16 BHP Economic Contribution Report 2020