Example:
The Chevron transfer pricing case is one of the most significant tax disputes in Australian history—and a landmark for global multinationals.At the heart of the case was a $2.5 billion intra-company loan from a U.S.-based Chevron subsidiary to Chevron Australia Holdings Pty Ltd (CAHPL). The loan carried a 9% interest rate, while the U.S. entity had borrowed the funds at just 1.2%. This structure allowed Chevron to deduct high interest payments in Australia (reducing its taxable income) while the U.S. entity earned profits on the spread—profits that weren’t taxed in the U.S.
The Australian Taxation Office (ATO) argued that this wasn’t an arm’s length transaction, as independent parties wouldn’t have agreed to such terms. The Full Federal Court agreed, ruling in 2017 that the interest rate exceeded what would be expected between unrelated parties. The decision upheld the ATO’s amended assessments under both Division 13 of the 1936 Act and Division 815-A of the 1997 Act2.Chevron faced a tax bill exceeding $300 million, plus costs. The case set a precedent for how Australia—and potentially other jurisdictions—approach cross-border financing and transfer pricing.
Outcome :
Chevron ultimately paid the tax bill related to its transfer pricing dispute with the Australian Taxation Office (ATO). After losing its appeal in 2017, Chevron agreed to settle the case and paid over AUD 1 billion, which included the disputed tax amount, penalties, and interest.Since then, Chevron Australia has significantly increased its tax contributions. In 2023 alone, it reported over AUD 5.9 billion in total tax and royalty payments, including AUD 3.5 billion in company income tax2. This marks a substantial shift from earlier years when it was criticized for aggressive tax minimization strategies.
A Digital Services Tax (DST) is a levy imposed on the gross revenues earned by large multinational tech companies from digital activities in a specific country—especially when those companies have little or no physical presence there. It’s designed to ensure that digital giants like Google, Meta, and Amazon pay tax where their users (and value creation) are located, not just where their headquarters are.Countries with Active DSTs
France – 3% on digital advertising, user data, and platforms
Italy – 3% on digital interfaces and advertising
Spain – 3% on online advertising and user data
Austria – 5% on digital advertising
Turkey – 7.5% on digital content and social media
India – 2% equalization levy on e-commerce; 6% on digital ads
Hungary – 7.5% on media and advertising
UK – 2% on search engines, social media, and marketplaces
Pakistan, Vietnam, Taiwan, Kyrgyzstan, Indonesia, Nepal – varying DSTs or withholding taxes on digital services
We know Canada DTS due to start today 1/7/2025 just got scrapped due to extortion by Trump.
Transfer Pricing and Digital Services Tax are taxing transactions or services in the country they occur. Trumps tax avoidance scheme 101 in play now for his tech bro buddies?
