ITF accuses North Sea oil majors of secretive tax evasion schemes

London-based International Transport Workers Federation (ITF) has released a report showing alleged secretive corporate structures and aggressive tax evasion schemes used by Chevron and other major North Sea oil producers.

ITF, a global union federation representing around 700 unions and more than 4.5 million transport workers from 150 countries, released its report named “Offshore Oil, Offshore Tax” on Wednesday accusing Chevron of using off-the-grid schemes for tax evasion purposes.

In the 2016 Budget, the UK Chancellor announced major new tax cuts to benefit the North Sea oil producers. ITF says that a Chevron executive is the honorary treasurer of the oil and gas lobby that demanded these cuts. On top of further reductions in the overall corporate tax rate, the Petroleum Revenue Tax was eliminated and the supplementary charge for oil companies was cut in half.

ITF says that the oil and gas industry may now receive more in subsidies than it pays in tax. The report stated an estimate that nearly £120 billion in potential tax revenue was not collected in 2014 which would pay for the entire National Health Service budget or Education & Transport budgets combined.

Cash pooling, or internal lending structures between subsidiaries of the same company, has been a common practice for multinationals, ITF says.

ITF points to Chevron Treasury BV (CTBV) in the Netherlands as the core of Chevron’s UK operation in a “cash pooling” function. CTBV ‘is engaged in the efficient utilizations of cash by managing cash pooling for a number of Chevron companies’. ITF claims that CTBV’s job is shifting, or ‘sweeping,’ cash around which may help to avoid tax obligations and make significant profits in the currency exchange and interest charges.  The report describes CTBV as having no employees and paying a €432,000 service charge to “Chevron Products UK Limited for work performed… [which] relates to tax, accounting and treasury services.” It added that CTBV is not registered in the UK but holds €1.12 billion in loans from pool participants.

$45.4 billion in offshore accounts

ITF added that, over the last two decades, Chevron has paid billions to settle tax disputes involving the United States, Indonesia, Saudi Arabia, Japan and many other countries making tax schemes a global trend for the company. The report states that, globally, Chevron reported stashing US$45.4 billion (£32.5 billion) in off-shore accounts and that the US Government has not approved a tax filing by the company since 2011. Some even longer.

The report accuses Chevron of tax avoidance being their business model. It names a case where Australia’s federal court recently ruled against Chevron in a landmark transfer pricing case. The court found that an AUD$2.5 billion high-cost related party loan shifted profits from Australia to Delaware. Interest payments reduced tax liability in Australia and made tax-free profits in Delaware. A much larger AUD$35 billion tax scheme with a similar structure is currently under audit by the Australian Tax Office.

Steve Cotton, ITF General Secretary, said that the report laid out in detail the secretive corporate structures used by Chevron and now copied by other oil companies.

“The public would be shocked to see how Chevron uses a complex web of companies to route money through the Netherlands, Bermuda and other tax havens. It has over 200 active subsidiaries in Bermuda alone.

“This at a time when there has been a dramatic reduction in tax revenue from the North Sea. In the mid-1980’s, taxes on the North Sea oil production accounted for nearly 9% of all tax receipts collected by the UK Government – today it is just 0.7%

“While production has fallen, tax revenues have fallen much further, due to tax cuts and aggressive tax minimisation schemes.

“It is well documented that both Shell and BP are using similar corporate structures to reduce their tax in the UK. Both BP and Shell in 2014 paid no UK corporate tax.”

Calls for inquiry

Cotton has called on the UK Parliament to establish an inquiry to investigate the corporate structures used by the oil companies operating in the North Sea and the impact they have on security, taxes and royalties. In his belief, the public will demand action from political leaders regarding the facts stated in the report.

Scottish Secretary of Unite, the largest union in the North Sea oil fields, Pat Rafferty said: “The UK government needs to investigate and step up action to clamp down on any inappropriate tax loopholes being exploited by Chevron to make sure UK taxpayers aren’t taken for a ride, and it pays its fair share.”

John McDonnell, MP, who has been briefed on the report, said: “This thorough new research blows open the complex tax avoidance measures undertaken by a major multinational. Anyone concerned with ending the scourge of tax avoidance needs to pay careful attention to its findings.

“It’s time to put a stop to these complex company structures that rip off taxpayers and place extra strains on public services across the globe.”

Offshore Energy Today has reached out to Chevron, seeking comment on the ITF allegations. We will update the article if we get a response.