UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
September 21, 2016
BHP BILLITON LIMITED | BHP BILLITON PLC | |
(ABN 49 004 028 077) | (REG. NO. 3196209) | |
(Exact name of Registrant as specified in its charter) | (Exact name of Registrant as specified in its charter) |
VICTORIA, AUSTRALIA | ENGLAND AND WALES | |
(Jurisdiction of incorporation or organisation) | (Jurisdiction of incorporation or organisation) | |
171 COLLINS STREET, MELBOURNE, VICTORIA 3000 AUSTRALIA |
NEATHOUSE PLACE, LONDON, UNITED KINGDOM | |
(Address of principal executive offices) | (Address of principal executive offices) |
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: x Form 20-F ¨ Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: ¨ Yes x No
If Yes is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): n/a
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BHP Billiton Limited and BHP Billiton Plc | ||||||
Date: September 21, 2016 | By: | /s/ Rachel Agnew | ||||
Name: | Rachel Agnew | |||||
Title: | Company Secretary |
bhpbilliton
Integrity
Resilience
Growth
Economic
contribution
and payments
to governments
Report 2016
Our Charter
We are BHP Billiton, a leading global
resources company.
Our purpose is to create long-term shareholder value through the discovery, acquisition, development and marketing of natural resources.
Our strategy is to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market.
Our Values
Sustainability
Putting health and safety first, being environmentally responsible and supporting our communities.
Integrity
Doing what is right and doing what we say we will do.
Respect
Embracing openness, trust, teamwork, diversity and relationships that are mutually
beneficial.
Performance
Achieving superior business results by stretching our
capabilities.
Simplicity
Focusing our efforts on the things that matter most.
Accountability
Defining and accepting responsibility and delivering on our
commitments.
We are successful when:
Our people start each day with a sense
of purpose and end the day with a sense of accomplishment.
Our teams are inclusive and diverse.
Our communities, customers and suppliers value their relationships with us.
Our asset
portfolio is world-class and sustainably developed.
Our operational discipline and financial strength enables our future growth.
Our shareholders receive a superior return on their investment.
Andrew Mackenzie
Chief Executive Officer
BHP Billiton Limited. ABN 49 004 028 077. Registered in Australia.
Registered office: 171 Collins Street, Melbourne, Victoria 3000, Australia. BHP Billiton Plc. Registration number 3196209. Registered in England and Wales. Registered office: Neathouse Place, London SW1V 1LH, United Kingdom. Each of BHP Billiton
Limited and BHP Billiton Plc is a member of the BHP Billiton Group, which is headquartered in Australia. BHP Billiton is a Dual Listed Company structure comprising BHP Billiton Limited and BHP Billiton Plc. The two entities continue to exist as
separate companies but operate as a combined Group known as BHP Billiton.
In this Report
Chief Financial Officers Introduction
1
2016 total payments to governments
2
Approach to transparency and tax
4
Global value chain
8
Our broader contribution
10
Our payments to governments
12
Tax disclosed in our 2016 Financial Statements
and reconciliation of taxes paid
18
Basis of report preparation
20
Glossary
22
Independent audit report to the directors of BHP Billiton
23
Corporate Directory
24
The headquarters of BHP Billiton Limited and the global headquarters of the combined BHP
Billiton Group are located in Melbourne, Australia. The headquarters of BHP Billiton Plc is located in London, United Kingdom. Both companies have identical Boards of Directors and are run by a unified management team. Throughout this publication,
the Boards are referred to collectively as the Board. Shareholders in each company have equivalent economic and voting rights in the BHP Billiton Group as a whole.
Chief Financial Officers
Introduction
We are proud to be a leader in transparency.
Peter Beaven
Chief Financial Officer
I am pleased to introduce BHP Billitons
Economic contribution and payments to governments Report for 2016.
This Report discloses the payments we have made during FY2016 on a country-by-country and
project-by-project basis. BHP Billiton is a leader in transparency and this Report includes additional information disclosed on a voluntary basis.
BHP Billiton is
proud of the contribution that we make to our host countries. In FY2016, our total economic contribution was US$26.7 billion which included payments to suppliers, wages and employee benefits, dividends, taxes and royalties. This includes our
voluntary contributions to our host communities. In FY2016, we invested US$179 million in communities.
In FY2016, we paid US$3.7 billion globally in taxes,
royalties and other payments. Our global adjusted effective tax rate was 35.8 per cent. Once royalties are included, this rate increases to 58.6 per cent.
Our
payments of taxes and royalties have decreased in FY2016 compared with prior years. This is reflective of lower profits due to lower prices. Our global adjusted effective tax rate has remained stable throughout the cycle (averaging 31.9 per cent
over the past decade).
In Australia where we pay the majority of our taxes and royalties, we continue to be one of the largest taxpayers. During the last decade, we
paid US$85 billion globally in taxes, royalties and other payments and US$58 billion
(A$65 billion) approximately in taxes, royalties and other payments in
Australia. The cyclical nature of the resources industry highlights the need to have internationally competitive tax systems for countries whose economies are able to rely on the resources industry to drive national wealth. This is critical to
ensure that returns from growth and development opportunities are sufficient to attract the required global investment capital into that country. This is the case for all industries, especially for those such as the resources industry where there is
global competition for limited capital.
BHP Billiton welcomes the public interest in important topics such as the integrity of tax systems globally and the
contribution, including through payment of taxes, that multinational companies make to the countries in which they operate. We support the principle that a countrys taxing rights should be aligned with the value created and the activities
undertaken in that jurisdiction. We also support the introduction of public disclosure requirements relating to beneficial ownership. These are issues that require leadership and a changed approach. We recognise this and seek to be an industry and
global leader in our level of public disclosure to foster an informed public policy debate. We look forward to discussing this Report with our stakeholders around the world and continuing our leadership role in transparency.
Peter Beaven
Chief Financial Officer
US$3.7 billion
Total payments to governments
US$26.7 billion
Total economic contribution
Economic contribution and payments to governments Report 2016 1
2016 total payments to governments
(1) Payments to
governments have been prepared on the basis set out in Basis of report preparation section.
Ref Business Projects Description Payments to governments
US$M (1)
Australia
1 Petroleum Australia Production Unit Offshore oil field
and gas processing facilities in Western Australia and Victoria
2 Petroleum Australian Joint Interest Unit North West Shelf Offshore oil and gas fields in
North West Shelf
3 Petroleum Australian Joint Interest Unit Bass Strait Offshore oil and gas fields in Bass Strait
4 Copper Olympic Dam Underground copper mine, also producing uranium, gold and silver
5 Iron
Ore Western Australia Iron Ore Integrated iron ore mines, rail and port operations in the Pilbara region of Western Australia
6 Coal Queensland Coal BHP Billiton
Mitsubishi Alliance Open-cut and underground metallurgical coal mines in the Queensland Bowen Basin and Hay Point Coal terminal BHP Billiton Mitsui Coal Two open-cut metallurgical coal mines in the Bowen Basin, Central Queensland
2,521.1
7 Coal New South Wales Energy Coal Open-cut energy coal mine and preparation plant in New South Wales
8 Petroleum, Iron Ore, Coal and Group & Unallocated Head Office entities Head Office entities in Australia
9 Group & Unallocated Nickel West Integrated sulphide mining, concentrating, smelting and refining operation in Western Australia
Chile
10 Copper Escondida Copper producing mine, located in northern Chile
11 Copper Pampa Norte Consists of the Cerro Colorado and Spence open-cut mines, producing copper cathode in northern Chile 596.6
12 Copper Head Office entities Head Office entities in Chile
United States of America
13 Petroleum Onshore US Onshore shale liquids and gas fields in Arkansas, Louisiana and Texas
14 Petroleum Gulf of Mexico Offshore oil and gas fields in the Gulf of Mexico
15 Coal New
Mexico Coal Two energy coal mines in New Mexico 421.1
16 Petroleum, Copper and Group & Unallocated Head Office entities Head Office entities in the United
States
Trinidad and Tobago
17 Petroleum Trinidad and Tobago Production Unit
Operated offshore oil and gas fields 51.1
Algeria
18 Petroleum Algeria Joint
Interest Unit Joint interest onshore oil and gas unit 45.0
Canada
19 Group
& Unallocated Jansen Interest in Potash via development projects in Saskatchewan, where the Jansen project is most advanced 44.2
20 Copper Head Office entities
Head Office entities in Canada
United Kingdom
21 Petroleum United Kingdom
Production Unit Operated and non-operated offshore oil and gas fields
(9.6) (2)
22 Group & Unallocated Head Office entities Head Office entities in the United Kingdom
Other countries
23 Petroleum Pakistan Production Unit (divested) and Head Office entities
Operated onshore oil and gas fields and Head Office entity in Pakistan 18.2
24 Iron Ore Head Office entities Head Office entities in Brazil 14.0
25 Copper Head Office entities Head Office entities in Peru 11.8
26 Coal IndoMet Seven coal
contracts of work covering a large metallurgical coal resource in Indonesia 9.7
27 Group & Unallocated Marketing and Head Office entities Marketing and Head
Offices for activities in Singapore 7.5
28 Group & Unallocated Marketing and Head Office entities Marketing and Head Offices for activities in China, India,
Japan and South Korea 5.9
29 Group & Unallocated Marketing and Head Office entities Marketing and Head Offices for activities in Switzerland 2.4
Total payment to governments 3,739.0
Equity Accounted Investment (3)
30 Iron Ore Samarco 50% interest in Samarco, open-cut iron ore mines, concentrators, pipelines, pelletising facilities and dedicated port in Brazil 21.2
31 Coal Cerrejón 33.33% interest in Cerrejón, an open-cut energy coal mine with integrated rail and port operations in Colombia 392.4
32 Copper Antamina 33.75% interest in Antamina, an open-cut copper and zinc mine in Peru 258.4
Total payment to governments including Equity Accounted Investments 4,411.0
(2) The net negative amounts paid to the United Kingdom of US$9.6 million comprise US$24.4 million of refunds offset by taxes paid of US$14.8 million. The refunds
mostly comprise US$23.6 million received in FY2016 in respect of corporate income taxes paid for the years FY2001 to FY2010. Corporate income taxes due and paid in respect of those years was approximately US$1.4 billion.
(3) 100 per cent of the payments made by Samarco, Cerrejón and Antamina are presented without adjustment for BHP Billitons ownership interest.
2 Economic contribution and payments to governments Report 2016
BHP Billiton pays taxes, royalties and other payments in accordance with the tax regulations and laws applying in the jurisdictions in
which we operate. This section outlines our payments to governments by country in FY2016.
21 US$(9.6) million
22
29 United Kingdom
19 20
US$45.0
million
18
Algeria
23
28
28
28
28
27
26
US$2,521.1
million
Australia
1
2
5
8
9
4
6
6
8
7
8
8
3
US$44.2
million
Canada
US$421.1
million
United States of America
15
16
13
13
13
16
14
US$51.1
million
Trinidad and Tobago
17
31
32
25
US$596.6
million
Chile
10
11
12
24
30
US$26.7 billion total contribution
through payments to suppliers, wages and
employee benefits, dividends, taxes and royalties.
US$3.7 billion globally in taxes, royalties and other payments to governments
including US$1.2 billion in corporate income taxes, US$0.4 billion in royalty-related income taxes such
as PRRT and US$1.5 billion in royalties.
35.8% global adjusted effective tax rate
58.6% once royalties are included.
~A$65 billion (US$58 billion)
Australian taxes and royalties
paid over last 10 years
BHP Billiton remains one of the largest taxpayers in Australia.
US$2.5 billion in Australian
taxes,
royalties and other payments to governments
including US$0.64 billion
for corporate income taxes (of this, corporate income tax of US$1.17 billion paid with US$0.53 billion refunds received in respect of prior years).
30.3%
Australian adjusted effective tax rate (corporate tax)
56.6% once PRRT and royalties are included.
Economic contribution and payments to governments Report 2016 3
Approach to transparency and tax
Overview
BHP Billiton is among the worlds largest producers of commodities that help improve the quality of life of billions of people around the world.
The scale and long-term nature of our operations enable us to make a significant economic contribution to the countries in which we operate. We support local and national economies
through the payment of taxes and royalties to our host governments, as well as through the creation of direct and indirect jobs, and the purchase of goods and services through our supply chains. We are committed to transparency. Being open about the
taxes and royalties we pay to governments is in the best interests of our shareholders, employees, customers and the communities in which we operate. For instance, when companies like us are transparent about their payments of taxes and royalties,
this enables a more informed debate about the integrity of tax regimes globally and the contribution that companies like BHP Billiton make in the countries in which they operate. In addition, this reduces the potential for corruption.
Our transparency progress
BHP Billiton has a long-standing commitment to transparency. In
2000, we first disclosed our aggregate payments of taxes and royalties around the world. Since then, the detail of our disclosure in relation to payments to governments has continually increased. In 2002, we became a member of the Extractive
Industries Transparency Initiative (EITI) and we are represented on the EITI Board. The EITI provides a global standard to promote open and accountable management of natural resources and ensures disclosure of taxes, royalties and other indirect tax
payments made by oil, gas and mining companies to governments, in an annual report submitted to EITI. In addition, we have been an active participant in EITI implementation processes in Australia and the United States. In 2015, we publicly supported
the EU Accounting Directive and voluntarily produced our Economic contribution and payments to governments Report, disclosing our payments to governments on a country-by-country and project-by-project basis in advance of any mandatory requirements
to do so.
This year, we have prepared Our payments to governments on pages 12 to 17 in accordance with the UK Regulations which implement the EU
Accounting Directive, and which is now a mandatory report. We also support the Australian Voluntary Tax Transparency Code with which this Report complies. In addition, the disclosures in this report are in line with the UK Large Business tax
compliance proposals.
BHP Billitons transparency progress
Our
increasing transparency disclosure
2000
BHP discloses aggregate global
payments of taxes and royalties.
2002
BHP Billiton became a member of the
Extractive Industries Transparency Initiative (EITI).
2005
BHP Billiton
discloses aggregate payments of taxes and royalties by global geographic regions.
2010
BHP Billiton discloses payments of taxes and royalties to host governments at a national level. Discloses taxes and royalty payments on a country-by-country basis.
2011
BHP Billiton discloses taxes borne and taxes collected on a country-by-country basis.
20122014 BHP Billiton discloses taxes borne and taxes collected on a country-by-country basis with the listing of offices/assets in those countries.
2015 BHP Billiton voluntarily discloses payments of taxes, royalties and other payments to governments at a sub-national level and on a project-by-project basis.
2016
BHP Billiton discloses total payments to governments under the UK
Regulations.
Voluntarily discloses under Australian Tax Transparency Code.
4
Economic contribution and payments to governments Report 2016
Our perspective on voluntary and mandatory disclosure
We support the establishment of a globally consistent regulatory disclosure framework, including equivalency provisions between jurisdictions. This would create a consistent basis
for companies to disclose payments to governments, minimise compliance costs and facilitate ease of comparison between jurisdictions, regardless of the country of operation or industry.
While there has been development of voluntary and mandatory disclosure initiatives in a number of jurisdictions in recent years, BHP Billiton is concerned by the considerable
policy uncertainty that remains as to whether a globally consistent disclosure framework will emerge from these multiple initiatives.
It is in the interests of all
stakeholders that there is ultimately a globally consistent disclosure framework. To this end, BHP Billiton will continue to engage with governments and regulators in relevant jurisdictions.
Our approach to tax
Our approach to tax is underpinned by our global tax principles that have
been reviewed and endorsed by the Risk and Audit Committee of the Board of BHP Billiton. We have established six principles that govern our global approach to tax. These are set out below with additional explanation.
Transparency
We are transparent about the taxes and royalties that we pay to governments
because we believe that openness allows our shareholders, employees, contractors, partners, customers and communities to understand the contribution we make and have a greater ability to assess the integrity of the tax systems in the countries in
which we operate.
Corporate citizenship
We act with integrity when engaging
with revenue authorities to support positive and sustainable relationships. Where possible, for the purposes of obtaining certainty of our tax positions, we engage with revenue authorities on a real-time basis regarding the application of the tax
law and to identify and resolve any disagreements on a timely basis.
Risk management and governance
We are committed to strong governance. We seek to identify, assess, control and report tax risks in accordance with our global risk management framework. Risks identified as
material are reported to the Risk and Audit Committee.
We have internal standards which clearly set out our approach to tax planning, the level of tax risk that
the Group is prepared to accept and escalation points and procedures. We have an adequately resourced Tax function staffed with appropriately qualified team members. The approval of the Tax function is required in the planning, implementation and
documentation for all business or share acquisitions and disposals, corporate restructures, cross-border financing and trading arrangements and significant business transactions.
Business rationale
Our transactions have proper commercial purposes and economic rationale. We
locate business activities where value is optimally created. We seek to have a tax charge that contributes to superior business performance and delivers long-term shareholder value. Accordingly, we do not engage in aggressive tax planning.
Compliance
We respect and comply with the laws of the jurisdictions in which
we operate. We meet all of our tax compliance obligations on time. Our tax obligations include pricing transactions in our global value chain according to where value is created, and economic activity occurs, in compliance with the Organisation for
Economic Co-operation and Development (OECD) guidelines, and based on the arms length principle.
We conduct annual review and assurance over our compliance
obligations.
Advocating reform
We support simple, stable and competitive tax
rules and the principle that the taxing rights of countries should be commensurate with where the economic activity occurs. We engage in the reform process of international tax rules (including transfer pricing) and local tax rules in the
jurisdictions in which we operate. We do this because we believe that tax systems should be effective, efficient and competitive, in order to support economic growth, job creation and long-term sustainable tax contributions.
Economic contribution and payments to governments Report 2016 5
Approach to transparency and tax continued
Current
international tax policy debate
Public interest in the integrity of tax regimes globally and the contribution that multinational companies make to the countries in
which they operate has significantly increased. This has led to initiatives such as the OECDs Base Erosion and Profit Shifting (BEPS) action plan and international policy debates regarding the use of companies in tax haven
jurisdictions.
BHP Billiton aims to constructively contribute to these debates and seeks to be an industry and global leader in our level of public disclosure, to
foster an informed public policy debate on these issues.
We support the introduction of public disclosure requirements relating to beneficial ownership (the
ultimate holder of the benefits of ownership of the company). This is because disclosure of beneficial ownership is an important element in ensuring assets and income are fully disclosed to relevant regulatory bodies, including revenue authorities,
to promote compliance with taxation laws. In addition, consistent with the BEPS action plan, we support a countrys taxing rights being aligned with the value that is created and the activities undertaken in that country.
Low-tax jurisdictions
The BHP Billiton Group currently includes 10 subsidiary companies that
are incorporated in low-tax jurisdictions. Details of each of these companies are provided below.
In identifying low-tax jurisdictions, we have
used the tax haven countries identified by the European Commissioner in June 2015. Further details are provided in the Glossary.
Incorporation
Name Jurisdiction Year Income taxed in another country Nature of activities (2)
BHP Billiton Australia UK Finance Limited British Virgin Islands 2005 UK (1) Dormant (liquidation planned)
BHP Billiton UK Holdings Limited British Virgin Islands (3) 2004 UK (1) Holding company
BHP
Billiton UK Investments Limited British Virgin Islands (3) 2004 UK (1) Holding company
Stein Insurance Company Limited Guernsey 1991 UK up until 30 June 2013 (4)
Insurance
Global BHP Copper Ltd Cayman Islands 1994 US (5) Holding company (legacy)
RAL Cayman Inc Cayman Islands 1986 Holding company (legacy)
Riocerro Inc Cayman Islands
1991 Holding company (legacy)
Riochile Inc Cayman Islands 1991 Holding company (legacy)
Marcona International S.A. Panama 1953 Dormant (liquidation planned)
BHP Petroleum
(Tankers) Limited Bermuda 1990 Australia (1) Ownership of LNG Tankers
(1) These companies are tax resident in either the UK or Australia, and have been since
incorporation. This means that all their worldwide income is subject to taxation in the UK or Australia at the normal corporate tax rates as the income is earned (not when it is repatriated).
(2) Holding companies hold shares in other subsidiary companies. Legacy holding companies joined the Group through historic broader acquisitions.
(3) The incorporation of these holding companies in the British Virgin Islands at that time provided greater flexibility in relation to the payment of distributions for
corporations law purposes.
(4) The income of Stein Insurance Company Limited was taxed under the UK controlled foreign company rules until 30 June 2013 when those
rules changed. Further details regarding Stein Insurance Company are included in the Other related party transactions section below.
(5) This company
is subject to taxation under the United States controlled foreign company (CFC) rules. In FY2015, all of its income was subject to taxation in the United States as the income was earned (not when it was repatriated). This will be the case for FY2016
as well.
Of the 10 companies incorporated in low-tax jurisdictions, close to 100 per cent of the income of five of these companies is taxed in another jurisdiction
(United Kingdom, Australia or United States). In addition, all of the subsidiary companies of the BHP Billiton Group are subject to the controlled foreign company tax rules of Australia or the United Kingdom. These rules tax passive income, such as
interest income, or sales income that has a connection with Australia.
We consistently review our Group structure with a view to liquidating any subsidiary
companies that are dormant or not otherwise required. In accordance with this practice, two of these 10 subsidiary companies incorporated in low-tax jurisdictions are planned for liquidation. All remaining companies continue to be assessed as to
whether it is practicable to liquidate them, or alternatively migrate their tax residency to another country.
6 Economic contribution and payments to governments
Report 2016
Assurance regimes
We act with integrity when
engaging with revenue authorities to support positive and sustainable relationships and we are subject to a number of assurance regimes globally in relation to our tax affairs.
For the purposes of obtaining certainty of our tax positions, we will seek to enter into instruments such as Advance Pricing Agreements (APAs) to agree the pricing
of intra-group transactions. We have no APAs currently in place. We are in negotiations with three revenue authorities, the Australian Tax Office (ATO), United States Internal Revenue Service (IRS) and Her Majestys Revenue and
Customs (HMRC) in the United Kingdom for the purposes of entering into APAs in relation to our intra-group service charges.
We have been given risk
ratings by revenue authorities in two of the jurisdictions in which we operate. These comprise: Australia Key Taxpayer risk rating and United Kingdom inherent moderate risk and behavioural low risk
business risk review ratings. These ratings categorise taxpayers according to risk. For example, Key Taxpayer in Australia means those taxpayers where the consequences of potential non-compliance is higher (in
terms of dollars, relative influence, impact on community confidence) and the likelihood of adopting a tax position that the ATO disagrees with (as evidenced by behaviour, approach to business activities, governance and compliance
with tax laws) is lower. Higher Risk Taxpayers are those taxpayers where the consequences and the likelihood of non-compliance are higher.
In Australia,
Key Taxpayer is the lowest risk rating BHP Billiton can achieve given our scale. In the United Kingdom, moderate risk is the lowest inherent risk rating that BHP Billiton can achieve given our scale; low
behavioural risk rating is the lowest possible.
These risk ratings are reflective of our approach to tax, in particular, not engaging in aggressive tax
planning and being open and transparent in our dealings with revenue authorities.
Economic contribution and payments to governments Report 2016 7
Global value chain
Creating value through our
global value chain
BHP Billiton operations
Smelter
Computer and components assembly
Worldwide market
Evaluation and exploration
Development
Extraction, processing and transportation
Marketing and logistics
Convert
Design
Build
Sell computer
Chile
Singapore
Korea
Taiwan
World
We create value for both our shareholders and the broader community through the
activities performed at each step in our value chain. Value is generated through creating jobs, purchasing goods/ services, paying taxes and royalties, making other payments to governments and the contributions (such as donations) we make to our
host communities. An example of our value chain in operation is shown above. BHP Billiton makes significant investments throughout each phase of the value chain. During each phase, we are faced with a range of financial, technical, operating
and market risks. We support the principle that a countrys taxing rights should be aligned with the value that is created and the activities undertaken in that country. Accordingly, we price commodities and charges across our global value
chain as if they were between independent, unrelated parties.
Marketing
Marketing is an independent core business of BHP Billiton. It is the link between BHP Billitons global operations and our global customers. Our Marketing
businesses are located to be close to our customers. As Asia accounts for 72 per cent of our revenue, the Marketing business for global minerals is headquartered in Singapore and for proximity to oil and gas markets,
headquartered in Houston for petroleum. Marketing employs approximately 300 people globally, with 50 per cent of these in Singapore. Other smaller offices are strategically located around the globe.
Our Marketing operations are run as independent businesses because this enables us to most effectively find markets for our commodities, maximise sales pricing and coordinate
logistics to deliver the commodities to our customers. For example, in FY2016, our Marketing businesses chartered 1,400 ships representing some seven per cent of dry seaborne bulk volumes. In addition, centralising our
Marketing businesses enables us to bring together in one regional location the expertise we need to understand and analyse the markets and the needs of our customers. Our Marketing businesses add value to our Company and consequently to
our shareholders and the countries in which we operate, by ensuring we receive the maximum price for our commodities. For instance, the Singapore Marketing team realised the price we received for Australian iron ore did not reflect the lower cost of
delivery into Asia when compared to other producing nations, such as Brazil. Put simply, Australian iron ore was undervalued. The Marketing team responded by creating a pricing mechanism that reflected the full value of Australian iron ore
effectively changing the way iron ore was priced globally. By ensuring Australian iron ore was properly valued by the market, this innovation not only incentivised greater investment in Australia, we estimate it has generated over
US$10 billion in additional taxes and royalties for Australian governments. The pricing that our Marketing businesses charge our operations is in line with the risks and activities undertaken and the value added. Our Marketing
businesses sell commodities on behalf of third parties as well as our own commodities. Charges to our operations are consistent with what our Marketing businesses charge third parties to market their commodities and equally what we expect
we would have to pay an external marketing business to market our commodities for us. This is the approach taken in the OECD guidelines.
8 Economic
contribution and payments to governments Report 2016
In relative terms, our Marketing profits are small compared with the profits made in Australia from the Australian operations. For
example, in FY2016, our main Singapore Marketing entity made profits of US$445 million (referable to our global operations), representing approximately 10 per cent of profits made in Australia by our Australian operations.
Taxation Singapore
The Singapore Government has granted BHP
Billiton a tax incentive for its marketing activities. In 2016, this tax incentive applied to all of the income made by the Singapore marketing entity.
Taxation Australia
All the profits made in Australia from the
production of commodities are taxed in Australia at the normal Australian corporate tax rate. Also, BHP Billiton pays royalties in Australia in relation to its Australian commodities. Since 2007, BHP Billiton has paid A$65 billion in taxes
and royalties in Australia.
In addition, around 58 per cent of the profits made by our Singapore Marketing business from the sale of our Australian
commodities are taxed in Australia, at the normal corporate tax rate, under the Controlled Foreign Company rules. This is because our Singapore Marketing entity is ultimately owned 58 per cent from Australia and 42 per cent owned from the
United Kingdom (which reflects the relative values at the time the Dual Listed Company structure was created). The 42 per cent share of the profits, although fully within the scope of the Controlled Foreign Company rules, are not taxed in the
United Kingdom due to the particular operation of those rules. Given the size, geographic scope and complexity of our operations and, at times, uncertainty regarding the application of taxation laws, we have occasional disagreements with
tax authorities over the amount of taxes to be paid. In this respect, BHP Billiton is no different from other large and complex corporations.
For
instance, we have a current dispute with the Australian Taxation Office (ATO) over the amount of taxes payable as a result of sales of Australian commodities to our Singapore Marketing business
dating back to FY2003. The dispute relates to the price at which Australian commodities are sold. It is a valuation issue and does not involve tax avoidance. We previously stated
that we received amended assessments relating to this transfer pricing dispute for FY2003 to FY2008 of A$362 million (inclusive of interest and penalties). At that time, we disclosed that the ATO was also auditing FY2009 to FY2013. Since
then, that audit has been completed and amended assessments have been received for these years totalling A$537 million (inclusive of interest and penalties). In accordance with the ATOs normal practice, BHP Billiton has made partial payments
for all these amended assessments of A$276 million (representing 50 per cent of the primary tax). Interest continues to accrue on the unpaid portion. In addition, this valuation dispute is relevant for computing Minerals Resource Rent Tax
(MRRT). We have received an amended assessment totalling A$117 million for FY2013 relating to MRRT. We made a partial payment in July 2016 of A$52 million being 50 per cent of the primary tax in dispute. BHP Billiton does not agree
with the ATOs position. Consequently, we have objected to all of the amended assessments and intend to continue to defend our position, including by initiating court action if necessary. While the assessments received from
the ATO (A$1,016 million in aggregate, of which A$661 million is primary tax) are significant, the dispute spans an 11-year period (FY2003 to FY2013) and the primary tax in dispute represents less than two per cent of the
taxes and royalties paid in Australia over that period.
Other related party transactions
Consistent with our commitment to transparency, we have voluntarily included information below about other material transactions between companies in the BHP Billiton
Group. We disclose our material transactions through the lodgement of our tax returns and other disclosures to revenue authorities. For example, in Australia, as part of our corporate tax returns,
we lodge detailed International Dealings Schedules, which quantify, by type, the transactions between the entities of our Australian tax consolidated groups and
offshore related parties.
Guernsey insurance company
BHP Billiton has an
internal self-insurance company incorporated in Guernsey (Stein Insurance Company Limited), which provides insurance to our global portfolio of 12 core operated assets and our Marketing businesses. The risks insured are primarily
property related. We choose to self-insure these risks because it makes economic sense to do so.
Our assets and Marketing businesses pay annual premiums to
the insurance company and receive insurance monies for insured losses suffered. For example, in Australia, in FY2016, Olympic Dam received insurance monies (US$185 million) in respect of the Svedala Mill failure. These insurance
monies were fully taxable in Australia. The insurance company is located in Guernsey because of the expertise available, lower capital requirements and strong regulatory rules compared with other jurisdictions. Over the last three years,
Stein Insurance Company Limited has made profits, on average, of approximately US$90 million per annum.
Financing
BHP Billitons Treasury function is located in London and Melbourne. BHP Billiton companies that are tax resident in the United Kingdom, United States and Australia
provide financing across the Group at market rates. Any income, including interest received by the BHP Billiton financing companies, is subject to tax in the United Kingdom, United States and Australia at normal corporate tax rates.
Intra-group administration and technology
BHP Billiton is a globally integrated group,
with people frequently working together across geographies. This involves entities within the Group providing services to each other. For example, when our Group Functions in Australia provide support to our businesses, the businesses are
charged a service fee. Our key jurisdictions that charge these service fees are Australia, USA, UK and Singapore.
Economic contribution and payments to
governments Report 2016 9
Our broader
contribution
The diagram below illustrates the total economic contribution we make around the world. In FY2016, this amounted to US$26.7 billion.
Our host communities can expect BHP Billiton to make a contribution to sustainable development through our core business. We believe we also have a responsibility, in line
with Our BHP Billiton Charter values, to acknowledge our host communities through our voluntary social investment. To do this, we voluntarily invest (1) one per cent of our pre-tax profit in community programs (calculated on the average of the
previous three years pre-tax profit). During FY2016, our voluntary social investment totalled US$178.7 million (2), comprising US$123.7 million of cash towards community development programs and administrative costs and a US$55 million
contribution to the BHP Billiton Foundation (a US-based charity).
BHP Billitons FY2016 total economic contribution (4)
Total payments
to governments
Suppliers
US$14.0b
Exploration
Development
Extraction,
Marketing
Income taxes
and evaluation
processing and
and logistics
transportation
Royalty-related
Employees
income taxes
Royalties
US$3.6b
Other payments
to governments
Shareholders, lenders
US$3.7b
and investors
US$5.2b(5)
Social investment (3)
US$178.7m
Total economic contribution (4)
US$26.7b
(1) Defined as voluntary company expenditure for social programs and environmental programs with net social benefit.
(2) Includes payments made by equity accounted investments.
(3) Community contribution
includes cash and administrative costs (US$123.7 million) and funds transferred to the BHP Billiton Foundation (US$55 million). Includes payments made by equity accounted investments.
(4) The total economic contribution made during FY2016 of US$26.7 billion is determined by combining total payments to governments of US$3.7 billion (determined on a cash paid
basis), payments to suppliers of US$14.0 billion, employee expenses of US$3.6 billion, distributions to shareholders and investors of US$5.2 billion (determined on an accruals basis) and community contribution of US$178.7 million.
(5) Shareholders and investors includes US$4.2 billion of dividends attributable to members of the BHP Billiton Group and US$1.0 billion of interest expense.
10 Economic contribution and payments to governments Report 2016
Community contribution
We voluntarily invest in
three ways: Through matched giving
We encourage employees who are active citizens in their communities to support local charitable organisations. Our global
Matched Giving Program recognises the contribution of our employees by matching their personal financial donations up to a specific cap. In FY2016, more than 7,500 of our employees participated in the Matched Giving Program. Employee
contributions benefited 768 not-for-profit organisations, which received US$7.3 million as part of the program.
Locally through our assets
Our community development programs aim to improve the quality of life for people in our host communities and contribute to the development of thriving and resilient regions. These
programs are designed and delivered locally, where our community specialists best understand the stakeholders, operating contexts, community risks, resources and needs.
Globally by contributing to the BHP Billiton Foundation
The BHP Billiton Foundation is a
US-based charity that we support through voluntary social investment. The work of the Foundation complements and goes beyond what the Company can achieve directly, by contributing to critical sustainable development challenges.
The Foundation partners with international institutions, not-for-profit and non-government organisations to make an appreciable difference to global sustainability challenges
over time, focusing on three key areas: natural resource governance; environmental resilience; educational equity.
The Foundation contributes
to improving the quality of life for people living in regions and countries where the Company has a business interest and in other regions of the world as the Foundation may independently select.
Matched giving FY2016
US$7.3m
in contributions
Social investment target (1)(2)
US$ million FY2012 FY2013 FY2014
FY2015 FY2016 0 50 123.7 100 55 150 200 250 300
Cash expenditures
Contributions to the BHP Billiton supported charities
Target
(1) The expenditures represent BHP Billitons equity share for both operated and
non-operated joint venture operations.
(2) Cash expenditures exclude expenditures from foundations and trusts.
Economic contribution and payments to governments Report 2016 11
Our payments to governments
Payments made by
country and level of government
Taxes paid by classification and country are presented in this section and have been prepared on the basis set out in
the Basis of report preparation section of this Report. BHP Billiton has prepared the following Report on payments to governments in accordance with the UK Regulations. Our Report addresses BHP Billitons reporting
obligations under DTR 4.3A of the Financial Conduct Authoritys Disclosure Guidance and Transparency Rules. The Basis of preparation and Glossary contain information about the content of our Report and form
part of our Report.
Corporate Royalty-related Taxes levied
US$ millions
income taxes income taxes on production Total taxes paid
Total payments to governments 1,219.9 424.7 160.2 1,804.8
Algeria (1)
Government of Algeria
Australia (2) 634.7 333.7 35.3 1,003.7
Government of Australia 634.7 333.7
35.3 1,003.7
State of Western Australia
Town of
Port Hedland (Western Australia)
Shire of East Pilbara (Western Australia)
Shire of Ashburton (Western Australia)
Shire of Wiluna (Western
Australia)
Shire of Leonara (Western Australia)
Shire of Meekatharra (Western Australia)
State of Queensland
Isaac Regional Council (Queensland)
Mackay Regional Council (Queensland)
State of New South Wales
Shire of Muswellbrook (New South Wales)
State of South Australia
State of Victoria
Central Highlands Regional Council
Brazil
9.2 0.4 9.6
Government of Brazil 9.2 0.4 9.6
Canada 9.6
9.6
Government of Canada 9.6 9.6
Government of
Saskatchewan
Rural Municipality of Leroy (Saskatchewan)
Rural Municipality of Prairie Rose (Saskatchewan)
Government of
Ontario
Government of Quebec
Chile (3) 488.5 88.0 576.5
Government of Chile 488.5 88.0 576.5
Municipalidad De Pozo Almonte
Municipalidad De Sierra Gorda
Municipalidad De Antofagasta
China 0.3 0.3
China Tax Bureau 0.3 0.3
India (0.2) (0.2)
Government of India (0.2) (0.2)
Indonesia
Government of Indonesia
Japan 1.1 1.1
Government of Japan 1.1
1.1
(1) Production entitlements of 1.0 million barrels of oil equivalent (boe) paid in-kind.
(2) The corporate income tax paid in Australia in FY2016 was US$634.7 million. This comprised corporate income tax instalments of US$1,029 million paid and payments of US$135
million in relation to disputed amended assessments for prior years, with US$529 million refunds received from prior years. These refunds relate to overpayments of income tax instalments in FY2015 and changes to tax positions for prior years as a
result of updated information.
(3) Income and mining taxes are paid in Chile on a calendar year basis. However, for the purpose of this Report, taxes paid are
included for BHP Billitons financial year (1 July 2015 to 30 June 2016). For reference, income tax and specific tax on mining activities paid by Escondida and Pampa Norte for CY2015 amount to US$712.0 million and US$84.9 million
respectively. Refunds of US$83.5 million were received during FY2016 primarily in relation to CY2015 and were included in the FY2016 net corporate income taxes paid to Chile of US$488.5 million.
12 Economic contribution and payments to governments Report 2016
Payments for Total payments as
Production
infrastructure defined by the Other Total payments
Royalties entitlements Fees improvements UK Regulations payments to governments
1,484.9 81.2 113.2 24.5 3,508.6 230.4 3,739.0
45.0 45.0 45.0
45.0 45.0 45.0
1,300.8 22.1 1.6 2,328.2
192.9 2,521.1
100.0 1.0 1,104.7 27.7 1,132.4
753.0 8.4
1.6 763.0 90.4 853.4
3.1 3.1 2.8 5.9
0.1
0.1 2.6 2.7
0.3 0.3
1.2 1.2
0.7 0.7
0.1 0.1
333.9 5.7 339.6 24.5
364.1
8.7 8.7
0.5 0.5
62.7 2.8 65.5 8.8 74.3
0.1
0.1 1.0 1.1
51.2 0.9 52.1 12.9 65.0
7.4 7.4
3.3 3.3
9.6 4.4 14.0
9.6 4.4 14.0
8.6 22.9 41.1 3.1 44.2
0.1 9.7 0.4 10.1
8.2 18.6 26.8 0.1 26.9
0.1 4.0 4.1 2.6 6.7
0.3 0.3 0.3
0.1 0.1 0.1
0.1 0.1 0.1
10.5 587.0 9.6 596.6
10.5 587.0 8.7 595.7
0.1 0.1
0.3 0.3
0.5 0.5
0.3 0.3
0.3 0.3
4.5 4.3 4.3
4.5 4.3 4.3
3.8 1.3 5.1 4.6 9.7
3.8 1.3 5.1 4.6 9.7
1.1 1.1
1.1 1.1
Economic contribution and payments
to governments Report 2016 13
Our payments
to governments continued
Payments made by country and level of government continued
Corporate Royalty-related Taxes
levied
US$ millions income taxes income taxes on production Total taxes paid
Pakistan 16.0 16.0
Government of Pakistan 16.0
16.0
Peru 9.5 9.5
Republica Del Peru 9.5 9.5
South Korea 0.2 0.2
Government of South Korea 0.2
0.2
Singapore 7.5 7.5
Government of Singapore 7.5
7.5
Switzerland 2.4 2.4
Government of Switzerland 2.4
2.4
Trinidad and Tobago (4)
Government of
the Republic of Trinidad and Tobago
United Kingdom (5) (17.6) 3.0 (14.6)
Government of United Kingdom (17.6) 3.0 (14.6)
City of Westminster
United States of America 58.7 124.5 183.2
Government of United
States 43.6 43.6
State of Texas 13.0 89.6 102.6
State of
Louisiana 26.2 26.2
State of Arkansas 5.4 5.4
State of New Mexico 2.1 3.3 5.4
State of Arizona
Commissioner of the Texas General Land Office
Navajo Nation Council
(4) Production entitlements of 0.9 million
boe paid in-kind.
(5) Net negative amounts paid to United Kingdom of US$9.6 million comprise US$24.4 million of refunds offset by taxes and other amounts paid of
US$14.8 million. The refunds comprise almost entirely of US$23.6 million received in FY2016 in respect of corporate income taxes paid for the years FY2001 to FY2010. Corporate income taxes due and paid in respect of those years was approximately
US$1.4 billion.
14 Economic contribution and payments to governments Report 2016
Payments for Total payments as
Production
infrastructure defined by the Other Total payments
Royalties entitlements Fees improvements UK Regulations payments to governments
2.2 18.2 18.2
2.2 18.2 18.2
2.3 11.8 11.8
2.3 11.8
11.8
0.2 0.2
0.2 0.2
7.5 7.5
7.5 7.5
2.4 2.4
2.4 2.4
36.2 14.9 51.1
51.1
36.2 14.9 51.1 51.1
(14.6) 5.0 (9.6)
(14.6) 1.7 (12.9)
3.3 3.3
178.1 49.0 410.3 10.8 421.1
142.2 44.3 230.1 4.9 235.0
32.0 134.6
134.6
2.2 28.4 5.9 34.3
0.5
5.9 5.9
0.1 0.1 5.6 5.6
0.7
0.7 0.7
3.9 3.9 3.9
1.1
1.1 1.1
Economic contribution and payments to governments Report 2016 15
Our payments
to governments continued
Payments made on a project-by-project basis
Taxes paid by classification and project are
presented in this section and have been prepared on the basis set out in the Basis of report preparation section of this Report.
Corporate
Royalty-related Taxes levied
US$ millions income taxes income taxes on production Total taxes paid
Total payments to governments 1,219.9 424.7 160.2 1,804.8
Petroleum 177.4 336.7 156.9 671.0
Australia Production Unit Western Australia 0.4 172.6 173.0
Australia Production Unit Victoria 6.5 17.7 24.2
Bass Strait
73.1 143.4 216.5
North West Shelf 232.7 35.3 268.0
Gulf of
Mexico 13.1 13.1
Onshore US (Fayetteville) 2.8 5.4 8.2
Onshore US (Haynesville) 26.2 26.2
Onshore US (Permian Basin,
Eagle Ford) 89.6 89.6
Trinidad and Tobago Production Unit (1)
Algeria Joint Interest Unit (2)
UK Production Unit (3) (19.9) 3.0
(16.9)
Head Office BHP Petroleum (Pakistan) Pty. Ltd. 12.5 12.5
Head Office BHP Billiton Petroleum International Pty. Ltd. (4) (157.1) (157.1)
Head Office BHP Billiton Brasil Investimentos Ltda. 0.7 0.4 1.1
Closed Mines 9.1
9.1
Pakistan Production Unit (divested) 3.5 3.5
Copper 436.4 88.0 524.4
Escondida 439.9 88.0 527.9
Pampa Norte 60.2 60.2
Olympic Dam (4) (78.1) (78.1)
Head Office BHP Chile Inc 4.9 4.9
Head Office RAL Cayman Inc. 9.5
9.5
Iron Ore 984.1 984.1
Western Australia Iron
Ore 975.6 975.6
Head Office BHP Billiton Brasil Ltda 8.5 8.5
Coal (57.6) 3.3 (54.3)
Queensland Coal (4)(5) (73.0) (73.0)
New Mexico 14.3 3.3 17.6
New South Wales Energy Coal
IndoMet
Head Office BHP Billiton MetCoal
Holdings Pty Ltd 1.1 1.1
Group & Unallocated (320.4) (320.4)
Corporate Head Office (4) (304.5) (304.5)
Marketing Offices 13.5
13.5
Nickel West (4) (29.9) (29.9)
Potash 0.5 0.5
(1) Production entitlements of 0.9 million boe paid in-kind.
(2) Production
entitlements of 1.0 million boe paid in-kind.
(3) Net negative amounts paid in relation to the UK Production Unit of US$16.9 million comprise US$24.4 million of
refunds offset by taxes paid of US$7.5 million. The refunds comprise almost entirely of US$23.6 million received in FY2016 in respect of corporate taxes paid for the years FY2001 to FY2010. Corporate income taxes due and paid in respect of those
years was approximately US$1.4 billion.
(4) The corporate income tax amount does not represent a refund from a government. Instead, it represents the allocation of
the Australian corporate income tax payment among members of the Australian tax consolidation group. For further information, refer to Basis of report preparation section.
(5) Royalties, fees and other payments made by BHP Billiton Mitsubishi Alliance Coal Operations Pty Ltd have been included in total payments to the extent of BHP Billitons
ownership of the operating entity, being 50%.
16 Economic contribution and payments to governments Report 2016
Royalties Production entitlements Fees Payments for infrastructure improvements Total payments as defined by the UK Regulations Other
payments Total payments to governments
1,484.9 81.2 113.2 24.5 3,508.6 230.4 3,739.0
271.1 81.2 67.4 1,090.7 13.4 1,104.1
0.5 173.5 4.6 178.1
24.2 24.2
216.5 216.5
100.0 0.1 368.1 368.1
134.1
42.7 189.9 5.0 194.9
0.6 8.8 8.8
2.2
28.4 1.5 29.9
32.0 3.9 125.5 0.1 125.6
36.2 14.9 51.1 0.3 51.4
45.0 4.5 49.5 49.5
(16.9) (16.9)
12.5 12.5
(157.1) (157.1)
1.1 1.6 2.7
0.8 9.9 0.3 10.2
2.2
5.7 5.7
51.2 14.8 590.4 23.4 613.8
5.3 533.2 8.5 541.7
1.5 61.7 1.0
62.7
51.2 1.2 (25.7) 13.8 (11.9)
6.8 11.7
0.1 11.8
9.5 9.5
743.0 9.0 1.6
1,737.7 100.7 1,838.4
743.0 9.0 1.6 1,729.2 97.9 1,827.1
8.5 2.8 11.3
409.6 10.9 366.2 58.1 424.3
333.9
5.7 266.6 38.5 305.1
9.2 1.0 27.8 4.0 31.8
62.7
2.9 65.6 10.1 75.7
3.8 1.3 5.1 4.6 9.7
1.1 0.9 2.0
10.0 11.1 22.9 (276.4) 34.8 (241.6)
(304.5) 15.1 (289.4)
13.5 3.8 17.3
10.0 2.7 (17.2) 13.2 (4.0)
8.4 22.9
31.8 2.7 34.5
Economic contribution and payments to governments Report 2016 17
Tax disclosed in our 2016 Financial Statements and reconciliation of taxes paid
Reconciliation of global income tax paid to global income tax expense
The corporate income
taxes and royalty-related income taxes presented in Our payments to governments, reflect the income taxes and royalty-related taxes paid/refunded as presented in the Consolidated Cash Flow Statement in the BHP Billiton Annual Report
2016. The table below presents a reconciliation of these taxes paid to the Income Tax Expense amount that is presented on an accrual basis in note 5 Income tax expense of BHP Billitons Consolidated Financial Statements.
2016
US$M
Income tax and royalty-related taxation paid (1) 1,645
Tax refunds relating to prior periods
(2) 451
Tax to be refunded (3) (116)
Taxes paid in-kind (non-cash) (4) 81
Other movements (5) 395
Tax expense in respect of current period taxable
income (current tax expense) 2,456
Future tax raising from differences between accounting values and tax values (deferred tax expense) (3,508)
Total taxation benefit (current and deferred tax benefit) (6) (1,052)
(1) As disclosed in the
Our payments to governments section of this Report as the combined total of corporate income taxes of US$1,219.9 million and royalty-related income taxes of US$424.7 million. This comprises all amounts paid and received in FY2016 on a
cash basis.
(2) These refunds were in respect of prior periods tax expense and were received in FY2016. These amounts are included in income tax and
royalty-related taxation of $1,645 million.
(3) These refunds were in respect of FY2016 tax expense but not received. They are not included in income tax and
royalty-related taxation of $1,645 million.
(4) Taxes in-kind include production entitlements of governments delivered and deliverable in respect of current period
production.
(5) This primarily relates to global tax matters net of payments made to revenue authorities for disputed amended assessments.
(6) As disclosed in BHP Billitons Consolidated Income Statement shown in the Annual Report 2016.
There are a number of reasons why the tax paid in any year will not be the same as the tax charge. For instance, tax expense includes amounts for deferred taxation, representing
timing differences between the accounting for transactions and when tax becomes due, and amounts for global tax matters.
Deferred tax balances
The composition of the Groups net deferred tax asset and liability recognised in the balance sheet and the deferred tax expense (credited)/charged to the income statement is
as follows:
Deferred tax assets Deferred tax liabilities (Credited)/charged to the income statement
2016 2016 2016
US$M US$M US$M
Type of temporary difference
Depreciation (3,223) 1,259 (2,282)
Exploration expenditure 656 (3)
Employee benefits 342 (6) 56
Closure and rehabilitation 1,711 (177) 36
Resource rent tax 661 1,905 (8)
Other provisions 145 (1) 8
Deferred income (11) (49)
Deferred charges (470) 372 62
Investments, including foreign tax credits 1,327 844 (284)
Foreign exchange gains and losses (77) 156 (310)
Tax-effected losses 5,006
(809)
Other 69 (17) 75
Total 6,147 4,324 (3,508)
18 Economic contribution and payments to governments Report 2016
Global adjusted effective tax rates
The
Groups global adjusted effective tax rate, which excludes the influence of exchange rate movements and exceptional items, was 35.8 per cent. The Groups adjusted effective tax rate is reconciled to the statutory effective tax rate below:
2016
(Loss)/Profit before taxation US$M Income tax benefit/ (expense) US$M %
Statutory effective tax rate (7,259) 1,052
Adjusted for:
Exchange rate movements 125
Exceptional items (1) 9,704 (2,053)
Adjusted effective tax rate 2,445 (876) 35.8
(1) FY2016: Exceptional items after tax include
impairment of Onshore US assets of US$4,884 million, Samarco Mineração S.A. dam failure of US$2,197 million and global tax matters of US$570 million.
The Groups statutory effective tax rate for FY2016 presents as nil because we recognised a total taxation benefit of US$1.1 billion (including government
imposed royalty-related taxation calculated by reference to profits) and a loss before taxation for the period of US$7.3 billion.
Reconciliation of accounting
profit to income tax expense
The net income tax benefit of US$1,052 million differs to the standard rate of Australian corporate tax as set out below:
2016
US$M
Factors affecting income tax expense for the period
Income tax expense
differs to the standard rate of corporate tax as follows:
Loss before taxation (7,259)
Tax on loss at Australian prima facie tax rate of 30 per cent (2,178)
Impact of tax rates
applicable outside Australia (620)
Tax on remitted and unremitted foreign earnings (376)
Recognition of previously unrecognised tax asset (36)
Investment and development allowance
(36)
Amounts over provided in prior years (28)
Tax rate changes 14
Foreign exchange adjustments 125
Tax effect of share of (loss)/profits from
equity accounted investments, related impairments and expenses (1) 631
Non-tax-effected operating losses and capital gains 671
Other 536
Income tax benefit (1,297)
Royalty-related taxation (net of income tax benefit) 245
Total taxation benefit (1,052)
(1) The (loss)/profits from equity accounted investments, related impairments and expenses is net of income tax. This item removes the prima facie tax effect on
such profits, related impairments and expenses.
Economic contribution and payments to governments Report 2016 19
Basis of report
preparation
We have prepared this Report in accordance with the UK Regulations.
Taxes, royalties and other
payments to governments are presented in this Report on a cash paid and cash received basis for the year ended 30 June 2016.
This Report includes all such
amounts paid and received by BHP Billiton in respect of each of our operations. For our controlled operations, amounts included in our total payments to governments are 100 per cent of the operations payments to governments. For our joint
operations, amounts included in our payments to governments are 100 per cent of the amounts paid by BHP Billiton and, in the case of BHP Billiton Mitsubishi Alliance (BMA), 50 per cent of payments made by the operating entity for BMA in which BHP
Billiton has a 50 per cent ownership. For our investments in joint ventures and associates that are equity accounted by BHP Billiton, no amounts have been included in our total payments to governments as BHP Billiton is not the operator and does not
make payments on behalf of the operation. For information purposes, payments made by our significant equity accounted investments, Samarco, Cerrejón and Antamina, have been shown on page 2 even though no amounts have been included in our
total payments to governments.
Taxes, royalties and other payments, both cash and in-kind (non-cash), to governments, net of refunds, are collectively referred to
in this Report as Total payments to governments and include the following payment categories:
Corporate income taxes
Payments to governments based on taxable profits under legislated income tax rules. This also includes payments made to revenue authorities in respect of disputed claims and
withholding taxes on dividends and royalties.
Royalty-related income taxes
Payments to governments in relation to profits from the extraction of natural resources, including Petroleum Resource Rent Tax (PRRT) in Australia and Specific Tax
on Mining Activities (STMA) in Chile. Royalty-related income taxes are presented as income tax in the Consolidated Income Statement in the BHP Billiton Annual Report 2016.
Taxes levied on production
Payments to governments in relation to crude excise, carbon tax and
severance tax on the extraction of natural resources. Taxes levied on production are presented as expenses, not income tax, in the Consolidated Income Statement in the BHP Billiton Annual Report 2016.
Royalties
Payments to governments in relation to revenue or production generated under licence
agreements. This also includes payments to revenue authorities in respect of disputed claims. Royalties are presented as expenses, not income tax, in the Consolidated Income Statement in the BHP Billiton Annual Report 2016. Royalty-related income
taxes are excluded from Royalties.
Production entitlements
Payments to
governments entitled to a share of production under production sharing agreements. Production entitlements are most often paid in-kind. In-kind payments are measured based on the market value of the commodity on the date of delivery to the
government.
Fees
Payments to governments in the form of fees typically levied
on the initial or ongoing right to use a geographical area for exploration, development and/or production. Includes licence fees, rental fees, entry fees and other payments for licences and/or concessions.
Payments for infrastructure improvements
Payments to governments for the construction of
public infrastructure such as roads, bridges and port facilities.
Dividend payments
Payments to governments with ownership interests in specific assets; not payments to governments as holders of ordinary shares in BHP Billiton. There were no dividend payments to
governments for the year ended 30 June 2016.
Signature, discovery or production bonuses
Payments to governments upon signing an oil and gas lease, when discovering natural resources, and/or when production has commenced. There were no payments of signature, discovery
or production bonuses to governments for the year ended 30 June 2016.
20 Economic contribution and payments to governments Report 2016
Other payments
Payments to governments under other
legislated tax rules such as payroll tax, fringe benefits tax, customs and excise duties, property tax, land tax, stamp duties, and black lung tax. These payments are not specifically required to be disclosed by the UK Regulations.
Excluded amounts
The following are not included in total payments to governments:
Taxes collected
Tax payments made to governments on behalf of our employees.
Indirect taxes
Tax payments made to, or received from, governments in the nature of Sales Tax,
Value Added Tax and Goods and Services Tax.
Penalties and interest
Payments
to governments resulting from the imposition of penalties, fees or interest.
Other
Any payment, whether made as a single payment or as a series of related payments below US$100,000 (being a lower amount than the £86,000 threshold set out in the UK
Regulations).
Projects
Payments made on a project-by-project basis
(Payments made on a project-by-project basis section of this Report) present payments by entity when not specifically attributable to a project.
Payments in relation to Corporate Head Office and Marketing Offices have been included in the total payments to governments as defined by the UK Regulations. The
payments are not attributable to specific projects. Corporate Head Office and Marketing Offices comprise functional support for the Group that in FY2016 comprises entirely of projects that undertake relevant activities as defined by the UK
Regulations.
The Payments made on a project-by-project basis section presents corporate income tax amounts for each project/entity taking into account
the effects of tax consolidation in Australia. These include the following:
Losses from one entity can be offset against taxable income of another entity
within the same tax consolidated group.
Only the head entity of a tax consolidated group is liable to make corporate income tax payments to the Australian
Tax Office (ATO).
Typically, corporate tax groups allocate the aggregate corporate income tax payments made by the head entity to the ATO amongst entities
within the Australian tax consolidated group.
In relation to BHP Billiton, the aggregate of all positive and negative allocations to members of the BHP Billiton
Australian tax consolidated groups, together with tax payments made by stand-alone Australian entity taxpayers, totals US$634.7 million in FY2016.
Reporting
Currency
All payments to governments on pages 12 to 17 have been reported in US dollars. Payments denominated in currencies other than US dollars are translated
for this Report at the exchange rate at the date of the payment.
Economic contribution and payments to governments Report 2016 21
Glossary
Australian adjusted effective tax rate
(corporate tax)
Total Australian corporate income tax expense excluding exceptional items and exchange movements included in taxation expense divided by
Profit before taxation and exceptional items.
Australian adjusted effective tax rate (corporate tax) including PRRT and royalties
Total Australian corporate income tax expense and royalty-related income tax expense excluding exceptional items and exchange movements included in taxation expense plus royalty
expense divided by Profit before taxation, royalties and exceptional items.
BHP Billiton or the Company
Being both companies in the Dual Listed Company structure, BHP Billiton Limited and BHP Billiton Plc and their subsidiaries.
Current tax expense
The amount of corporate income tax and royalty-related income tax and
production entitlements currently payable and attributable to the year, measured at rates enacted or substantively enacted at year-end, together with any adjustment to those taxes payable in respect of previous years.
Deferred tax expense
The amount of corporate income tax and royalty-related income tax and
production entitlements attributable to the current year but payable in future years provided using the balance sheet liability method.
Global adjusted effective
tax and royalty rate
Total income tax expense excluding exceptional items and exchange movements included in taxation expense plus royalty expense divided by
Profit before taxation, royalties and exceptional items.
Global adjusted effective tax rate
Total taxation expense excluding exceptional items and exchange rate movements included in taxation expense divided by Profit before taxation and exceptional items.
Group
BHP Billiton Limited, BHP Billiton Plc and their subsidiaries, being entities controlled
by BHP Billiton Limited or BHP Billiton Plc.
Government
Government means any
national, regional or local authority of a country, and includes a department, agency or undertaking that is a subsidiary undertaking where the authority is the parent undertaking.
Income tax expense
The total of current tax expense and deferred tax expense.
Low-tax jurisdictions
In classifying which countries are low-tax jurisdictions we
have applied the list of so-called tax haven countries released by the European Commissioner on 17 June 2015. This list comprises those so-called tax haven countries that have been included on the list of at least 10
individual countries of the European Union. The countries currently included on this list are: Andorra, Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Brunei, Cayman Islands, Cook Islands, Grenada,
Guernsey, Hong Kong, Liberia, Liechtenstein, Maldives, Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, Nieu, Panama, Seychelles, St Kitts and Nevis, St Vincent and the Grenadines, Turks and Caicos, US Virgin Islands, Vanuatu. This list does
not include Singapore. We will continue to monitor international developments in this area.
Project
Consistent with the UK Regulations, a project is defined as the operational activities that are governed by a single contract, licence, lease, concession or similar legal
agreements and form the basis for payment liabilities with a government. If multiple such agreements are substantially interconnected they may be considered a project. For these purposes substantially interconnected means
forming a set of operationally and geographically integrated contracts, licences, leases or concessions or related agreements with substantially similar terms that are signed with a government, giving rise to payment liabilities.
Report
The Report has been prepared for the financial year from 1 July 2015 to
30 June 2016 of BHP Billiton.
UK Regulations
The Reports to Payments to
Governments Regulations 2014, as amended by the Reports on Payments to Governments (Amendment) Regulations 2015. The UK Regulations implement the EU Accounting Directive in the United Kingdom.
22 Economic contribution and payments to governments Report 2016
Independent audit report
to the directors of BHP
Billiton
Independent Auditors report
Our opinion
In our opinion, the Total payments to governments of US$3,739.0 million (Total payments to governments) as presented in the Our payments to governments
section of the BHP Billiton Groups (BHP Billiton) Economic contribution and payments to governments Report 2016 (the Report) is prepared, in all material respects, in accordance with the Basis of report preparation set out in the
Basis of report preparation section of the Report (the Basis of report preparation).
Criteria used as the basis of reporting
The Basis of report preparation contained in the Basis of report preparation section of the Report is of such importance that it is fundamental to your understanding of
the Total payments to governments. This has not caused us to modify our opinion.
Basis of conclusion
We performed an audit in order to express an opinion as to whether the Total payments to governments was prepared in accordance with the Basis of report preparation.
We conducted our audit in accordance with Australian Auditing Standards. According to those standards, we must:
comply with relevant ethical requirements;
plan and perform the audit to obtain
reasonable assurance about whether the Total payments to governments has been prepared in all material respects in accordance with the Basis of report preparation.
We performed procedures to obtain audit evidence about the Total payments to governments. We used our judgement to select procedures, including our assessment of the risks of
material misstatement of the Total payments to governments, whether due to fraud or error.
We do not express an opinion on BHP Billitons internal controls.
However, we do consider relevant internal controls in the design of our audit procedures.
We also evaluate the appropriateness of the Basis of report
preparation in relation to the Total payments to governments. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
BHP Billitons responsibility
BHP Billiton is responsible for:
the preparation and presentation of the Report;
establishing a framework in
which the Total payments to governments and other related information in the Report has been prepared;
determining that the framework as set out in the
Basis of report preparation meets its needs;
establishing internal controls and processes that enable the preparation and presentation of the Report that is
free from material misstatement, whether due to fraud or error.
Use of this Audit Report
This audit report has been prepared for BHP Billiton in accordance with our engagement letter and is intended solely for the Directors of BHP Billiton.
We disclaim any assumption of responsibility for any reliance on this audit report, or the Report to which it relates, to any person other than the Directors of BHP Billiton, or
for any purpose other than that for which it was prepared.
Our independence
In conducting our audit, we have complied with the independence requirements of the Accounting Professional and Ethical Standards Board.
KPMG
Melbourne
8 September 2016
© 2016 KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability
limited by a scheme approved under Professional Standards Legislation.
Economic contribution and payments to governments Report 2016 23
Corporate Directory
BHP Billiton Group Registered
Offices
BHP Billiton Limited
Australia
171 Collins Street
Melbourne VIC 3000
Telephone Australia 1300 55 47 57
Telephone International +61 3 9609 3333
Facsimile +61 3 9609 3015
BHP Billiton Plc
United Kingdom
Neathouse Place
London SW1V 1LH
Telephone +44 20 7802 4000
Facsimile +44 20 7802 4111
Group Company Secretary
Margaret Taylor
Share Registrars and Transfer Offices
Australia
BHP Billiton Limited Registrar
Computershare Investor Services
Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067
Postal address GPO Box 2975
Melbourne VIC 3001
Telephone 1300 656 780 (within Australia)
+61 3 9415 4020 (outside Australia)
Facsimile +61 3 9473 2460
Email enquiries:
www.investorcentre.com/bhp
United Kingdom
BHP Billiton Plc Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS13 8AE
Postal address (for general enquiries)
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
Telephone +44 (0) 344 472 7001
Facsimile +44 (0) 370 703 6101
Email enquiries:
www.investorcentre.co.uk/contactus
BHP Billiton Corporate Centres
Chile
Cerro El Plomo 6000
Piso 18
Las Condes 7560623
Santiago
Telephone +56 2 2579 5000
Facsimile +56 2 2207 6517
United States
Our agent for service in the United States
is Maria Isabel Reuter at:
1360 Post Oak Boulevard, Suite 150
Houston, TX 77056-3020
Telephone +1 713 961 8500
Facsimile +1 713 961 8400
South Africa
BHP Billiton Plc Branch Register
and Transfer Secretary
Computershare Investor Services
(Pty) Limited
70 Marshall Street
Johannesburg 2001
Postal address PO Box 61051
Marshalltown 2107
Telephone +27 11 373 0033
Facsimile +27 11 688 5217
Email enquiries:
web.queries@computershare.co.za
Holders of shares dematerialised into Strate
should contact their CSDP or stockbroker.
New Zealand
Computershare Investor Services Limited
Level 2/159 Hurstmere Road
Takapuna Auckland 0622
Postal address Private Bag 92119
Auckland 1142
Telephone +64 9 488 8777
Facsimile +64 9 488 8787
Marketing Office
Singapore
10 Marina Boulevard, #50-01
Marina Bay Financial Centre, Tower 2
Singapore 018983
Telephone +65 6421 6000
Facsimile +65 6421 7000
United States
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Postal address PO Box 43078
Providence, RI 02940-3078
Telephone +1 888 404 6340
(toll-free within US)
Facsimile +1 312 601 4331
ADR Depositary, Transfer Agent and Registrar
Citibank Shareholder Services
PO Box 43077
Providence, RI 02940-3077
Telephone +1 781 575 4555 (outside of US)
+1 877 248 4237 (+1-877-CITIADR)
(toll-free within US)
Facsimile +1 201 324 3284
Email enquiries:
citibank@shareholders-online.com
Website: www.citi.com/dr
How to access information on BHP Billiton
BHP Billiton produces a range of publications that
can be viewed or downloaded at www.bhpbilliton.com. If you are a shareholder, you can also elect to receive a paper copy of the Annual Report through the Share Registrar (above).
Latest news, Reports and presentations
Company overview (including Our BHP Billiton Charter,
structure and governance)
Subscribe to receive news alerts
sent directly to
your email address
www.linkedin.com/company/bhp-billiton
www.youtube.com/bhpbilliton
www.twitter.com/bhpbilliton
bhpbilliton
Integrity
Resilience
Growth
Annual Report
2016
Annual Report
2016
bhpbilliton
Integrity
Resilience
Growth
Sustainability
Report 2016
Sustainability
Report 2016
24 Economic contribution and payments to governments Report 2016
bhpbilliton