❓ Mr. Redman questions the government regarding BHP's alleged royalty underpayment, including the timeline of events, reasons for pursuing back payments only to 2004, and the confidentiality surrounding the matter. The government provides answers, citing confidentiality and routine audits.
AnsweredQoN 4618Legislative Assembly
Asked
12 February 2019
Member
Portfolio
Mines and Petroleum; Energy; Industrial Relations
QuestionView source ↗
I refer to the reported underpayment of Royalties by BHP and ask: (a) When did BHP start claiming the disputed ‘sales commission’ deduction according to government audits; (b) When did Government first raise the disputed ‘sales commission’ deduction with BHP; (c) When did BHP stop claiming the disputed deduction; (d) Why is the Government only pursuing back payments to 2004; (e) Gareth Parker wrote on 27th January 2019 “there was a specific, though so far undisclosed reason, those public servants went over the books again.” What was the reason; (f) If the audit as claimed by the Treasurer was ‘routine’; why did the legitimacy of the deduction not get picked up earlier; (g) What was the length of time between the audit finishing and the discrepancy being raised with BHP; (h) Will you table correspondence between BHP and Government on this issue; (i) What meetings have you and/or Treasury had with BHP on this issue; what were the dates and who was present at the meetings; (j) Does the State Agreement with BHP define legitimate deductions; (k) What document/agreement gives the State direction in defining legitimate deductions for mining companies paying royalties to the state; (l) Does the Treasurer expect the Commonwealth to claw back any windfall payments to the state through the Commonwealth Grants Commission: (i) If so, what proportion of the disputed underpayment will the State retain; (m) Has BHP admitted a royalty underpayment to the State: (i) If no, why are they reported as apparently keen to settle; and (ii) If yes, how long have they known they owe the State royalties; and (n) Has the audit identified any other mining company that has potentially underpaid royalties to the State?
AnswerView source ↗
Answered
13 March 2019
Responded by
Minister for Mines and Petroleum; Energy; Industrial Relations
Response time
7 days
(a) The deductions now in dispute relate to arrangements that commenced in 2002.
(b) April 2017.
(c) BHP commenced paying the correct royalty in March 2018.
(d) Changed marketing and distribution arrangements entered into by BHP in 2002 affected the basis for claiming deductions in respect of "sales commission".
(e) All royalty arrangements and payments are periodically audited by DMIRS.
(f) The issue was the result of an ordinary audit of the royalty return.
(g) The audit was completed in May 2017. See answer (b) for when the matter was raised with BHP.
(h) No. Royalty returns and payments are lodged with DMIRS on a confidential basis as they contain commercially sensitive, company specific information. Royalty assessment matters that arise are therefore dealt with in confidence between the State and the Company.
(i) Royalty assessment matters that arise are dealt with in confidence between the State and the Company.
(j) The deductions that may be claimed are set out in each State Agreement Act and are therefore on the public record.
(k) The relevant State Agreement Acts.
(l) This is a question for the Treasurer.
(i) Not applicable
(m) No
(i) Not applicable
(ii) Not applicable
(n) All royalty arrangements and payments are periodically audited by DMIRS. Through regular royalty audits, audit queries are occasionally raised with royalty payers and dealt with by the Department. Royalty assessment matters that arise are dealt with in confidence between the State and the relevant company.
(b) April 2017.
(c) BHP commenced paying the correct royalty in March 2018.
(d) Changed marketing and distribution arrangements entered into by BHP in 2002 affected the basis for claiming deductions in respect of "sales commission".
(e) All royalty arrangements and payments are periodically audited by DMIRS.
(f) The issue was the result of an ordinary audit of the royalty return.
(g) The audit was completed in May 2017. See answer (b) for when the matter was raised with BHP.
(h) No. Royalty returns and payments are lodged with DMIRS on a confidential basis as they contain commercially sensitive, company specific information. Royalty assessment matters that arise are therefore dealt with in confidence between the State and the Company.
(i) Royalty assessment matters that arise are dealt with in confidence between the State and the Company.
(j) The deductions that may be claimed are set out in each State Agreement Act and are therefore on the public record.
(k) The relevant State Agreement Acts.
(l) This is a question for the Treasurer.
(i) Not applicable
(m) No
(i) Not applicable
(ii) Not applicable
(n) All royalty arrangements and payments are periodically audited by DMIRS. Through regular royalty audits, audit queries are occasionally raised with royalty payers and dealt with by the Department. Royalty assessment matters that arise are dealt with in confidence between the State and the relevant company.
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