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Economics References Committee
14/03/2018
Corporate tax avoidance

BROWN, Mr Stuart, Tax Manager, ExxonMobil Australia

HARDGROVE, Mr Craig, Chief Financial Officer, ExxonMobil Australia

OWEN, Mr Richard, Chairman, ExxonMobil Australia

[10:25]

CHAIR: Welcome and thank you for appearing before the committee today. I invite you to make a brief opening statement should you wish to do so, then we'll open it up for questions.

Mr Owen : I would like to make a brief opening statement. In my opening comments, I intend to address outstanding concerns and correct some of the misinformation being disseminated about ExxonMobil's tax record and will provide you with some facts around ExxonMobil's important contributions to Australia's economy and our continuing long-term commitment to the country's energy future.

CHAIR: Mr Owen, are you seeking to table this document?

Mr Owen : I am seeking to table that, and I'm going to address that in just a moment, at the end of my opening comments.

CHAIR: There's no objection to that document being tabled? Thank you very much.

Mr Owen : ExxonMobil Australia has been operating successfully in this country since 1895. We have always considered our reputation for ethical and honest dealings as our most vital corporate asset. I am happy to address a little bit later on the comments that were made. We've made significant contributions to Australia's economic wellbeing through the reliable supply of energy to help fuel growth. We have invested nearly $40 billion in the country, and we owe it to our stakeholders, including government officials, our customers and the general public to address the concerns about energy supplies, costs and taxes, both factually and transparently. The tax act is one of the most, if not the most, complex pieces of regulation governing the way a company does business in Australia. As a result, it is not well understood outside the policymaking, accounting and tax law community; therefore, bits of information taken out of proper context can easily and even maliciously be manipulated in attempts to achieve political ends.

There is a lot of inaccurate and false information currently appearing on the internet and social media that is making it difficult for people to break through the noise and distinguish fact from fiction and reach informed views on many complex aspects of our economy, including energy production. This is why I'm pleased to appear here before you and the special interest groups claiming ExxonMobil Australia doesn't pay its fair share of tax and address those questions. The claim is completely baseless and simply untrue. ExxonMobil Australia has a long history of paying its fair share of taxes in Australia, having paid more than $2 billion in corporate income tax alone since 2000—and we will show you that on the chart in a moment—as well as more than $12 billion in petroleum rent tax since 1990. We've just completed a decade of record capital investment, which has included a multibillion dollar projects like the Gorgon project and the Kipper Tuna Turrum project. These investments have helped secure jobs for thousands of Australians. These investments will also generate future revenue and taxes for the government, but they did put ExxonMobil in a tax loss position in 2016, and we expect to have taxable income going forward.

We appreciate and agree with the basic and genuine concern that the public and government have in regard to ensuring that companies pay their appropriate share of taxes. Tax transparency is vital and important in sustaining a modern economy, and it's important to a company's social licence to operate. Given our shared concern on this point, ExxonMobil Australia has voluntarily signed the Australian Taxation Office's tax transparency code. We want the community to have confidence that ExxonMobil works with the Australian tax office to ensure it always meets its tax commitments, and ExxonMobil takes pride in its compliance programs, which, on any measure, stack up against the best in the world.

We're also proud that our tax payments have helped fund vital government programs and services for more than five decades and counting. When I joined the company back in the 1980s, our Gippsland Basin joint venture with BHP was providing 10 per cent of all federal government revenue. I'll just repeat that—10 per cent of all federal government revenue. We continue to be a major contributor to the Australian economy. Recent ACIL Allen economic modelling shows that the combined direct and indirect economic benefits of ExxonMobil's investments to date have accounted and will continue to account for nearly a $6 billion increase in gross domestic product equivalent per year. That's from the 1960s to the 2060s—at least a century's worth of significant value to the country.

Now we are preparing to compete for billions of dollars in capital to develop the next phase of energy projects. I'm quite mindful that what's at stake in this competition for capital is the future of thousands of Australian jobs. Australia's cost of doing business—its fiscal terms, including taxation—will significantly influence the competitiveness and ability to drive economic growth in an era of fierce global competition to attract energy investment. I'm confident that, with constructive dialogue and thoughtful policymaking, Australia will continue to be an attractive market. We've been a proud partner in Australia's economic and energy development for decades and look forward to the next phase.

Again, I thank you very much for the opportunity to appear today. Now I'll just refer to these charts just briefly, because I think that they may address a number of the concerns. They clearly show a little bit more information than has been available from other sources. If you look at the first page—the pages are numbered at the bottom—you can see historical income tax payments going from 2002 to 2016. We are a historically high corporate income tax payer, with over $2 billion paid since 2002, as you can see in that 2002 to 2012 time frame. We are averaging $200 million per year. We're in a unique period, and expect it to be short term in our corporate history, with no income tax paid since 2013. Just to be clear—that's due to the recovery of invested capital, lower prices that are driving down income and the cost of debt to fund the significant amount of investment that we've made, which I'll show you in a moment. So far we've invested about $21 billion just in the recent decade.

If you go to the next page—and I know there's been a lot of discounting of the petroleum resource rent tax—you can see our payments from 2004 to 2016. There have been average payments of over $440 million per year in resource rent tax for the past 14 years and, as already noted by a number of prior speakers, over $12 billion in PRRT paid since 1990.

Senator KITCHING: Mr Owen, can I just ask a clarifying question? Just on the first chart on page 2—income tax paid—is 'ExxonMobil Australia Consolidated' the name of the entity, or does 'consolidated' mean consolidated income tax payments made by a number of companies?

Mr Owen : It's for the ExxonMobil Australia group of companies, which is—

Senator KITCHING: So maybe we could bracket 'consolidated'.

Mr Owen : Yes, it's ExxonMobil Australia.

Senator KITCHING: How many companies is that?

Mr Brown : Since the tax consolidation regime started in around 2003 it's just ExxonMobil Australia as a single taxpayer.

Senator KITCHING: No, what I'm asking is: how many—

Mr Brown : In the group?

Senator KITCHING: How many companies are there under this chart of historical income tax payments?

Mr Brown : Since 2003 all the payments made by ExxonMobil Australia—there is only one taxpayer under the Australian tax rule. It's a consolidated regime. All these subsidiaries feed up into ExxonMobil Australia, making one payment.

Senator KITCHING: Right, so how many subsidiaries are there?

Mr Brown : We'll take it on notice.

Senator KITCHING: There are 280 approximately, I think, in Delaware. How many are there here?

Mr Brown : In Australia?

Senator KITCHING: How many subsidiaries here?

Mr Owen : There are six principal companies. There are more, but there are six principal companies. They are Esso Australia Resources Pty Ltd, which is essentially Bass Strait operations; Esso Australia Pty Ltd, which is essentially the employment company where we're providing the services to—

Senator KITCHING: So would you say services, employment and contractor services?

Mr Owen : Yes. We're the operator for the joint venture in Bass Strait. There is Esso Ventures, which is really looking at exploration opportunities; Mobil Refining Australia, operating our refining assets—

Senator KITCHING: Is that over in Altona?

Mr Owen : Yes, correct. There is Mobil Australia Resources Company, through which we're investing in the Gorgon project, and Mobil Oil Australia, which is the company that is essentially our wholesaler of fuel in Australia.

Senator KITCHING: Thank you.

CHAIR: And you'll come back to us as to the number of subsidiary companies—

Senator KITCHING: Beneath those ones, yes.

Mr Owen : Okay. I think we're on page 4. You can see that we've plotted here, just to be clear, what the nature of our business is, and really that list of companies provided it. You can see here the split of income between the downstream and then excise, which we're collecting on behalf of the Commonwealth government, and then the upstream revenues and then non-Australian revenues—so that's some of the investments we have outside Australia, where the money comes back to Australia. Then, over the top of that, we've plotted the crude price.

This comes back to what is being referred to as revenue. You can see here in particular—to differentiate ourselves, because I think we were compared to a number of companies, predominantly in the upstream—that, when you look at our revenue, we're predominantly a downstream company. If you look at 2016, 82 per cent of the revenue that's generated in Australia is from the downstream business. That's refining and wholesale fuel sales. So this is not around oil and gas production. This is similar to a lot of retailers: we're importing product.

Just to put that in context, we've been importing different products into Australia to provide to the Australian people since 1895. If you look at our entire history, most of it has been in importing. We got into refining just before 1960, and in mid-1965 we got into the upstream business in Bass Strait. You can see there that in the yellow on that chart is the upstream portion of the investment, which is essentially the revenue that's associated with our investments in Bass Strait and in Gorgon. There's not much of Gorgon in there at that point, in 2016, so it's predominantly Bass Strait.

CHAIR: How much of this information is available publicly currently?

Mr Owen : I suspect, now that we've given it to you, that it probably is public information now.

CHAIR: So this hasn't been publicly available?

Mr Hardgrove : No, it hasn't. This is the first time we've broken this up. It has not been a requirement to do it. To give clarity around our business is why we've done it. The top number is certainly available. The revenue number that the Tax Justice Network and others reference, which is that $7 billion or the $21 billion over three years, is the number you can see there.

CHAIR: Whilst we appreciate that information, why have you waited till a Senate inquiry to present this? Do you think it could be beneficial?

Mr Owen : Primarily it's driven by the amount of misinformation and innuendo that's been put out into the social media and the media in general. We've been meeting all of the requirements in terms of disclosure under the Voluntary Tax Transparency Code and under our other ASIC requirements, but we're happy to share additional information, because we have nothing to hide.

Mr Hardgrove : I think another reason why that has not been disclosed is that, in that first chart, we have literally decades and decades of tax-paying history in Australia. This is a unique period, 2013 onwards, and Richard will talk to the chart in a minute. This is a unique period in the company history. Until that period, we've paid tax year after year. That's the differential that I think we're coming to now.

Mr Owen : In the last chart in there that I was just going to highlight, you can see here the historically relatively low level of capital spend to maintain our ongoing operations—that first phase there, with about half a billion dollars a year in capital investment. Then you can see, from 2009-10, there's significant ramp-up in investment into the country with Gorgon and the Kipper Tuna Turrum project. I noted that there was a previous witness statement talking about having no idea what the investments are and whether they're true or not. They're physical assets. We're not a service provider that could just move from one place to another; we're a resource development company. The assets that we have are fixed in place because of where the oil and gas is. We have refineries that are fixed in place, so we're not talking about some assets that can just be moved around. On our website, you can go and see video clips of the massive infrastructure that's been invested in to provide the oil and gas for this country.

CHAIR: Again, is the chart that you've provided to us on page 5 publicly available information, or is this new?

Mr Hardgrove : This is the capital investment chart?

CHAIR: Yes.

Mr Hardgrove : Fundamentally, it's straight out of our ASIC filings. The ASIC filings show the capital investment we make year by year, and that data is available out of those ASIC filings.

Mr Owen : I recognise that that's a significant amount of new information, but it's just trying to be quite clear that we've been a long-term taxpayer and have made a significant contribution to the country. The only reason we're not paying tax at the moment is that we've just invested $21 billion.

Senator KITCHING: Mr Owen, given that you and Mr Brown are taking on notice to give us a fuller picture of the corporate structure, is it possible—where it's applicable, because it won't be applicable to all the six principal companies you've outlined—to give us a breakdown of the revenue under the chart on page 4, the historical revenue base, and where that revenue is coming from in those six principals, or from subsidiaries of the six principals, where applicable?

Mr Brown : It's very easy. Until 2016, the green to downstream is almost all Mobil Australia.

Senator KITCHING: Okay. That's the wholesaler?

Mr Brown : Yes. And the yellow is Esso Australia Resources.

Senator KITCHING: Thank you.

CHAIR: I note the non-Australian component has increased. Can you give us a breakdown of what that represents?

Mr Hardgrove : The non-Australian piece is driven by two pieces: an interest we have in the Papua New Guinea gas project and, also, our interest in Indonesia in the Cepu project, where we've got 20-odd per cent interest. As that Cepu project has come online and started to grow, we recognise those revenues as part of our overall revenue structure for Australia. Those revenues are fully taxed in those jurisdictions of Indonesia and PNG, so there is after-tax revenue that we're recognising here. Cepu will continue to grow, having come online in 2016-17.

CHAIR: I understand the point you're making about investment. The other resource companies also make substantial investments. Let's look at, for example, Woodside Energy—I want to give you the opportunity to explain the difference here to us. Between 2013 and 2016, Woodside paid $1.2 billion in corporate income tax. At the same time, you've acknowledged you haven't paid anything. Can you tell us why that's the case?

Mr Owen : I think it's all down to how much has been invested. I don't know exactly what Woodside has invested over that period of time. I can only represent what we've invested. You can see that significant ramp-up of investment at that time.

Mr Hardgrove : To look at Woodside, I think their revenues are $7 billion, back in 2014, and $5 billion and $5 billion—so a total of $17 billion over the last three years. That's all upstream revenue. Their expenditures, I recall, are in the $3 billion to $4 billion range over that same period. When you compare it to our business, the upstream revenue for our business is somewhere in the $3 billion to $4 billion range with expenditures of $21 billion. It's a significantly different profile. Eighty to 90 per cent of our revenue is downstream revenue. That's the key difference.

CHAIR: Had Exxon contributed $1.38 billion to ATO revenue over that period of time, that's the equivalent of 16,000 nurses, 21,000 teachers and 37,000 apprentices across Australia. Can you understand the perception in the community that the company is not paying its fair share?

Mr Owen : Absolutely; I think it's a legitimate concern. That's one of the reasons why we're very pleased to be here and talk about our tax record. As I said, in the 1970s and into the eighties, we were providing 14 per cent of all federal government receipts. The amount of tax that's been paid out of the joint venture Bass Strait operation is considerable, and we are very proud. We often quote the same numbers in terms of how many schools, hospitals, roads and social programs were created out of the excise, royalty and tax that was paid out of Bass Strait through the seventies and eighties. We are at a later stage in Bass Strait operations now, and we've just got to a stage now where we have reinvested a significant amount of capital in these projects. That is the reason why we're in a period of time at the moment where we're not paying company tax.

CHAIR: Can you tell us when you expect Exxon to start to pay corporate income tax?

Mr Brown : On current projections—it does depend a lot on foreign exchange rate and crude prices—around 2020 or 2021.

CHAIR: 2021?

Mr Brown : Yes. And, once we start paying, we expect to be paying around $600 million a year, by the early 2020s.

CHAIR: So another three or so years of no payment of corporate income tax?

Mr Brown : Correct.

Mr Owen : Just to clarify: we'll have taxable income going forward, but we will be working off, I guess, tax losses.

CHAIR: Are there any active ATO audits that are underway at the moment or any ongoing litigation with the tax office?

Mr Brown : No litigation. We have one current audit. It is on the pricing of our related-party loans, which have been, obviously, a topic of discussion this morning. I would say that that audit has been going for some time. The ATO has provided an initial view. We have responded with a detailed report from an international bank supporting our pricing. I would also say: the way we do our pricing is quite different from the way that Chevron did the pricing as coming from the facts in the Chevron case. Assuming that the ATO is not convinced by the position paper report and there is a gap, that gap is still small. It would have a very, very small impact on our overall tax losses at the moment and certainly would not change our position from being in a tax loss if the ATO were to proceed with their current position.

CHAIR: Mr Brown, you just said you've finished up a discussion this morning—

Mr Brown : The discussion this morning around interest rates.

CHAIR: How much was spent on legal costs with the ATO in the past 10 years?

Mr Brown : I've no idea. I'll take it on notice.

CHAIR: If you could take that on notice, that'd be good.

Senator KITCHING: Can I just clarify: there must be, in your internal financial reporting at least, a line item on legal expenditure. Can you break that down? You must budget for it: 'In the next financial year, we think we're going to spend X.' What would that figure be?

Mr Brown : I have a tax budget, and the law function has a budget, and I have a budget for external counsel costs, yes.

Senator KITCHING: What is that?

Mr Brown : This year, it would be a couple of hundred thousand dollars.

Senator KITCHING: Do you also make provision for any contingent losses in case there are some penalties you might have to pay?

Mr Brown : We have no provisions at the moment.

CHAIR: Senator Cameron, did you have a follow-up question?

Senator CAMERON: I have a number of questions. Firstly, Mr Owen, could you address the issue that you've raised in your submission about defamation? You do understand that you can't take action or it would be illegal to take action to intimidate anyone who provides a submission to this committee? Do you understand that?

Mr Owen : Yes, certainly I understand that. We weren't threatening defamation. We just said that the statements being made were defamatory statements in that they suggested that we had deliberately misled this committee, which is also illegal. So I'm just trying to clarify the point.

Senator CAMERON: That's fine. Do you have a taxation department in Exxon?

Mr Brown : I'm the manager of it.

Senator CAMERON: How many people are employed in it?

Mr Brown : Twelve.

Senator CAMERON: What's the cost to the company annually for that department?

Mr Brown : My current budget is around $3 million.

Senator CAMERON: So that's $3 million a year just on tax issues?

Mr Brown : A year. Remember, we're paying $2.5 billion a year; it goes on looking after—

Senator CAMERON: I'm not asking that.

Mr Brown : So, in context—

Senator CAMERON: I'm asking you: do you also get external advice on tax?

Mr Brown : That's included in that budget.

Senator CAMERON: Have you ever, as a company, placed higher levels of third-party debt in high tax countries?

Mr Brown : Sorry—placed?

Senator CAMERON: The OECD talks about base erosion and profit shifting. Right? They say that there are three basic scenarios. The first scenario is of groups placing higher levels of third-party debt in high taxing countries. Have you ever engaged in that type of activity?

Mr Brown : The last time we had external debts in Australia would've been around 2001.

Senator CAMERON: How much was that debt?

Mr Brown : I think it was around $1 billion. I'll have to take it on notice. That was a long time ago!

Senator CAMERON: Can you provide—

Mr Brown : In the context of ExxonMobil, it was a low amount of debt.

Senator CAMERON: Did that reduce your taxation in Australia?

Mr Brown : It was a deduction, yes. The interest was deductible.

Senator CAMERON: Can you provide details of that. Have you used intragroup loans to generate interest deductions in excess of the group's actual third-party interest expense?

Mr Brown : I have to take that on notice. I'm not sure what the group's external interest is. I know what the Australian one is. I'm not sure what the group's one is.

Senator CAMERON: You have entities around the world that are related to the Australian company, haven't you?

Mr Brown : We have subsidiaries of Australian companies, as we've said, in PNG and Indonesia.

Senator CAMERON: But what about ownership? Is the final ownership in the Bahamas?

Mr Brown : The final ownership is Exxon Mobil Corporation in America.

Senator CAMERON: But there are interrelated activities and interrelated companies in the Bahamas and the Netherlands, aren't there?

Mr Owen : Just to be clear, first of all we're representing ExxonMobil Australia here, and for all of those entities that roll up into ExxonMobil Australia, which is the tax-paying entity in Australia, all of the revenue is recognised in Australia, and tax is paid in Australia.

Senator CAMERON: Yes. You might not be representing the group within Australia, but you report externally, don't you?

Senator MARSHALL: You surely know who owns you.

Mr Brown : Yes, we do know who owns us.

Mr Owen : We're owned by a Dutch affiliate—that's been made clear—and ultimately by Exxon Mobil Corporation.

Senator CAMERON: What about the Bahamas? What's the relationship with the Bahamas?

Mr Brown : We have had a loan from a Bahamian entity. That's now been repaid. That was disclosed in our 2015 submission.

Senator CAMERON: Did that loan reduce your taxable income in Australia?

Mr Brown : There was an arm's-length interest rate paid on that loan. That was deductible in Australia.

Senator CAMERON: Do you use third-party or intragroup financing to fund your generation of tax-exempt income?

Mr Brown : No. We don't have tax-exempt income.

Senator CAMERON: Tax-exempt income would be income if you're borrowing money at a high rate. You know the BEPS approach, don't you?

Mr Brown : I'm not sure what you're driving at, but we borrow money and we pay interest.

Senator CAMERON: It's not what I'm driving at. It's what the OECD is driving at. The OECD says there are companies that are using these approaches to reduce their tax.

Mr Brown : I'm saying we don't have any exempt income in Australia.

Senator CAMERON: All right. The OECD says that, as a conservative estimate, base erosion and profit shifting is costing governments around the world between US$100 billion and US$240 billion a year. Are you engaging in any aspects of that? Are you contributing to this amount?

Mr Brown : No.

Senator CAMERON: You're not? Has your company dealt with the OECD on these issues?

Mr Brown : We've made submissions to the OECD.

Senator CAMERON: There's a list of companies in the OECD that are engaged in some of these activities. Are you on that list?

Mr Brown : I'm not sure.

Senator CAMERON: You're not sure?

Mr Brown : I don't think so. We can take that on notice, if you like, and come back. I would not think so.

Senator CAMERON: Well, I think you should. Either the OECD is investigating you and has you on the list or it isn't and hasn't.

Mr Brown : The OECD is not investigating us.

Senator CAMERON: Okay. You'll take it on notice if you're part of that approach that the OECD has taken.

Mr Brown : Yes, we'll take that on notice.

Senator CAMERON: In relation to the ATO, you are engaging with them at the moment?

Mr Brown : Yes.

Senator CAMERON: You have different disclosure notices both in Australia and in New Zealand. There are different disclosure obligations. Is that correct?

Mr Brown : I would assume so. Again, we're here representing ExxonMobil Australia.

Senator CAMERON: There's also this approach called a hybrid mismatch arrangement.

Mr Brown : Yes.

Senator CAMERON: Have you ever had discussions with either the ATO or the OECD, or any jurisdiction, about engaging in—

Mr Brown : We have read the new legislation.

Senator CAMERON: Just let me finish: about engaging in hybrid mismatch arrangements?

Mr Brown : We have no hybrid mismatch arrangements.

Senator CAMERON: None? And no intragroup loans?

Mr Brown : We've talked about that already.

Senator CAMERON: And you've only had one intragroup loan recently?

Mr Brown : We've had two. I think there was one from the US. I think there were two lendings.

Mr Hardgrove : We have one loan directly with the US parent, and we did have one loan with a Bahamian affiliate, and that loan's been paid out.

Senator CAMERON: What was the effect of your tax deductions in Australia relating to those loans?

Mr Hardgrove : They were deductable in Australia. The Bahamian loan at two per cent was deductable in Australia.

Senator CAMERON: And how much is that in Australian dollars?

Mr Hardgrove : It's about a billion-dollar loan.

Senator CAMERON: So two per cent of a billion dollars—

Mr Hardgrove : Was deductable.

Senator CAMERON: What was the other loan?

Mr Hardgrove : The other loan is funding that capital expenditure that we've detailed on the chart that we've provided.

Senator CAMERON: What interest rates are you paying on that?

Mr Hardgrove : Over the period of time, that rate has been between four and five per cent. As we sit here in front of you today, the interest rate is three per cent.

Senator CAMERON: Are you getting tax deductions based on that that you would not normally have had in Australia?

Mr Hardgrove : I'm not sure about the differentiation 'not normally had', but that is a deductable expense for tax purposes, yes.

Senator CAMERON: What was the amount of that deductable expense?

Mr Brown : The total interest deduction is about $600 million a year.

Senator CAMERON: And you don't pay corporate tax—

Senator HUME: Just a follow-on question from Senator Cameron's question, what market rate—

Senator CAMERON: Chair, she just can't jump in. I'm in the middle of asking a question.

Senator HUME: It's just a follow-up question, Senator Cameron. I just want to know what the market rate of interest is compared to the rate that you're paying currently on those loans from your parent company, Mr Brown?

Mr Brown : Our pricing is set in accordance with arms-length principles. As I said, the Chevron decision had no impact on our pricing, because we were pricing it differently. We have a report from an international bank that actually says that we probably underpriced

CHAIR: Senator Cameron, you have the call.

Senator CAMERON: Can you just explain to us what arrangement the Australian entity has with the Netherlands, the Bahamas and the Delaware entities?

Mr Brown : There are no transactions between Australia and the Dutch owner other than dividends, which haven't happened since 20—

Mr Hardgrove : Not in the last decade. The relationship is directly with the parent, and that is the Dutch entity. We have not transferred one cent to that Dutch entity in the past decade. That $2 billion of after-tax earnings we've generated in Australia has been put back into this business and funded that $19 billion to $21 billion of capex we previously talked about.

Senator CAMERON: What's the relationship between the Dutch entity and the Bahamas entity?

Mr Brown : We'll take that on notice. It has nothing to do with Australia. We can take it on notice if you need to know the answer, but it has no impact on Australian tax affairs.

Senator CAMERON: I'm not saying that it has any impact, but they do have an ownership in the Australian company, don't they?

Mr Brown : The Bahamian company has no direct ownership. It owns a Dutch company, which owns the Australian company.

Senator CAMERON: So why have you entered that arrangement?

Mr Owen : When you ask why we have entered that arrangement, we're representing, as you know, the Australian entity. Ultimately, all of that ownership flows up through ExxonMobil Corporation. The corporation has determined what it likes about different structures about that.

Senator CAMERON: I'll bet it has.

Mr Owen : But the key point here, Senator, as you know, is that all revenue generated in Australia is recognised in Australia and taxed in Australia. To the point that Craig was just making before, no dividends have even flowed out of Australia to the parent for the last decade as we've gone through a massive investment in infrastructure in both Bass Strait and Western Australia.

Senator CAMERON: Which means you won't be paying any corporate tax—

Mr Owen : We won't be paying any dividends, is what I said.

Senator CAMERON: Will you be paying corporate tax?

Mr Brown : I said we think in around 2021. It could be earlier; it could be—

Senator CAMERON: For how long will it have been that you've not paid any corporate tax?

Mr Brown : Eight years.

Senator CAMERON: Eight years and no corporate tax. The PRRT is also part of a payment made for access to the resources, isn't it?

Mr Brown : Correct.

Senator CAMERON: The analogy I used earlier—I'm not sure if you were here—it's like letting Bunnings pay RYOBI to buy drills to resell. Would that be a similar position?

Mr Brown : It's the payment that the resource owner makes to the Australian government.

Senator CAMERON: Yes, to access the resources. They're Australian resources. They're not your resources; they're our resources. Will you be paying anything for those resources over the next few years?

Mr Brown : We paid $266 million in 2016 and over $300 million in 2017.

Senator CAMERON: What was the value of the resources that you extracted?

Mr Owen : Again, you can see that too.

Mr Hardgrove : If you get back to the revenue chart, which is on page 3—or whatever we gave to you—I think the distraction here is this $7 billion.

Senator CAMERON: It's not a distraction; I'm not looking for distractions. I'm asking you what was the value of the resources that you extracted from Australia?

Mr Brown : It's 40 per cent of the revenue, in effect. It's 40 per cent of the cash flow is the PRRT. It's 40 per cent tax—40 per cent of the free cash flow is paid as PRRT.

Senator CAMERON: Would it be fair to say that at any stage you have not paid for the resources that you've extracted?

Mr Brown : It definitely would not be fair to say that.

Senator CAMERON: I mentioned earlier this report before the committee at the moment on the effective tax ratio. Have you read that report?

Mr Owen : I have not.

Senator CAMERON: No? You didn't look at all these submissions that came in? Nobody did that?

Mr Brown : Which one is it?

Senator CAMERON: It's submission 158. On page 8 there is a graph entitled 'Effective tax ratios for hydrocarbons production in selected jurisdictions' and on page 9 is one entitled 'Unit price for hydrocarbons production in selected jurisdictions'. What is shown consistently is that Australia and the UK are at the bottom of that analysis, so companies are paying less in terms of tax. Is there a reason for that?

Mr Owen : I think one of the things that we just need to be mindful of is generalising, and generalising across the sector. Just to make sure that we're thinking about what our business is, it's quite an old and established business, Bass Strait. There's a new part of that, which isn't coming into any of these numbers because it's only just started up, which is the Gorgon investment. But, if you look historically at Bass Strait, Bass Strait started as a royalty and excise regime, as I think we've testified at previous hearings.

Senator CAMERON: Yes.

Mr Owen : In fact, I'm not sure how many people even remember that system but, when I joined the company in 1983, the marginal barrel of oil out of Bass Strait was paying 87c in royalty, excise and tax to the federal and state governments at the time. It was in 1990 that it changed from a royalty and excise system to a PRRT system, but because it's a very mature system we essentially immediately started paying resource rent tax and company tax on all of the production out of Bass Strait—and just allowing for the normal deductions of operating costs and capital.

Senator CAMERON: Is it your view, your assertion, that, when the OECD conservatively estimates that there is up to a $240 billion tax base erosion, Exxon are playing absolutely no part in that at all?

Mr Owen : When you look at the period that we're inquiring over here, absolutely not. Bass Strait is a completely different type of operation.

Senator CAMERON: Can you explain to me then why the effective tax ratios are declining in a period when the unit price is increasing?

Mr Owen : The whole reason that our company tax rate is going down, or has gone to zero in recent years, is because of a $21 billion investment in both future gas production out of Bass Strait and the Gorgon project. You can see from the typical revenues that were getting—no, you can't—but we have not been able to, obviously, fund that out of our current cash flow.

Senator CAMERON: If you made the same investment in Europe, there would be higher returns to Australia under the European tax approach, wouldn't there?

Mr Owen : I don't know. If you just explain what their basis is? I guess it's just a flat rate there.

Senator CAMERON: This paper indicates that if we applied the same taxation approach and the same PRRT approach as Europe, Australia would be getting a much higher return.

Mr Owen : I suspect, although I don't know for sure, that's true for new projects but it wouldn't be the same for an established, historical project like Bass Strait. Remember, Bass Strait shifted to a PRRT and was immediately paying 40 per cent resource rent tax. If we move to a 10 per cent royalty process, it would be a lower return to the government.

Senator CAMERON: Are you arguing for company tax? Have you been publicly arguing for reductions in corporate tax in Australia?

Mr Owen : We have not been publicly arguing for it.

Senator CAMERON: Have you been privately supporting it?

Mr Owen : There are two aspects I would talk about on that whole question. First of all, we're mainly focused on an upstream business. In an upstream business, we're normally making significant investments like the $21 billion that we've talked about. The return on those investments takes place over perhaps 30, 40, 50 or 60 years of business. Once we've put that large bet down, that investment, we've got to continue to get that return. Normally, when we're making those investments, we judge the risks that we have with the resource and with the market and we look for fiscal certainty. That's one of the reasons why we've argued quite strongly before this committee previously that it's important that we have some fiscal certainty going forward in those processes.

Senator CAMERON: And governments need fiscal certainty as well. They need an income to pay for hospitals, for education and for infrastructure. What's good for you guys is good for the public as well.

Mr Owen : But, on the way that large investments are made in the resource industry, we work out the stakeholders' different stakes in that, based on not one parameter but looking across all of the parameters: resource rent tax, tax arrangements and project financing. We like to have that stability. When we look at the company tax rate overall, while it doesn't tend to apply because of the very long time scales of those projects, in a different aspect it's going to be important for Australia, ultimately, to be competitive in the longer term. It just depends on a mix of different things: the headline tax rate, but also all the underlying things that we've been talking about, whether it's project financing or thin capitalisation. All of those things roll into whether Australia ultimately continues to be an attractive place to invest. It has been an attractive place—

Senator CAMERON: How much has been invested in the last decade?

Mr Owen : Twenty-one billion dollars.

Senator CAMERON: So you're saying that, if we don't reduce the corporate tax, you won't invest in Australia?

Mr Owen : I didn't say that at all.

Senator CAMERON: No—I'm asking you.

Mr Owen : You asked me and I said no, I'm not saying that.

Senator CAMERON: Of course you wouldn't. You'd continue to invest, wouldn't you?

Mr Owen : No, I'm just not saying that. I'm saying that we've invested under a certain set of rules and that it's important for us to have stability under those rules. On the second question, in the resource industry, one factor may well be tax, but ultimately it's about resource potential. It's about whether you've got quality resources. We're currently exploring in Bass Strait to see if we can find more gas. Ultimately, whether that project is financed will be dependent on whether there are any changes to PRRT and whether there are any changes to tax rates, but that will be a decision after we've actually spent $100 million or $150 million exploring to see whether we can find additional gas.

Senator CAMERON: On the ATO's measures to encourage greater transparency, there hasn't been a consistent view put to us that they don't go far enough. You have given us more information this morning. Why can't we get more transparency? The economists talk about information asymmetry. With the lack of information, the information asymmetry that's there, it makes it very difficult for us to actually judge what's happening, doesn't it?

Mr Owen : It certainly does, which is why we 've provided you with significantly more information, it's why we signed up for the ATO's voluntary tax transparency measures and it's why we've been part of the Extractive Industries Transparency Initiative, both globally and locally.

Senator CAMERON: I've got your tax fact sheet here and it's in the broad, isn't it? It really is in the broad. It's not detailed at all.

Mr Owen : I tell you what: I would say that it's a significant step further along than we were a number of years ago, in terms of the information that we're sharing. The charts that we shared today go further and a number of the initiatives with the tax office will continue to go further, so we're actually on a journey. I think both politicians and the community want more information and more granularity. We're happy to share that because we're quite proud of what we're achieving in the country and our tax record.

Senator CAMERON: For instance, you've got this pie chart approach. It says, 'This is what we're doing,' but that doesn't really tell you much.

Mr Owen : I don't know what you need to know.

Senator CAMERON: You would need to know what is involved in the depreciation allowance and what is involved in the PRRT. These are just broad-based percentages. That's all you've done publicly, isn't it?

Mr Hardgrove : No. That's supported by the ASIC filings, and the ASIC filings have a full breakdown. Under line item 10 of our filings for our annual accounts there is a breakdown of our investment and depreciation available for viewing.

Senator CAMERON: So you're saying no adverse findings have been made against Exxon anywhere in the world, in terms of tax.

Mr Brown : We're not saying that. That is specifically around transfer pricing of crude oil and refined products. These are internationally traded commodities, and we are reviewed by revenue authorities around the world on a regular basis. We have had minor findings, but no substantial findings, in relation to the pricing of those products.

Senator CAMERON: What about adverse tax findings generally?

Mr Brown : ExxonMobil is one of the world's biggest taxpayers, and it will have tax disputes around the world, including in Australia—that's on the record.

Senator CAMERON: Can you provide details of significant tax findings that have been made against you in other jurisdictions?

Mr Brown : We can take it on notice.

Senator CAMERON: You also indicate here that you want to be transparent and open and a good corporate citizen. Why don't you apply that to your industrial relations where you have workers now who have basically been locked out. You do a deal with a company where five workers determine the basis of an industrial agreement, and that is then imposed on workers, and those workers, who don't want to lose significant amounts of income, have then lost their jobs. Where's the morality in that?

Mr Owen : Ultimately, to put this in perspective, we have around about 1,700 employees in Australia and we probably employ around about the same number of contractors. There are probably 1,700 to 2,000 contractors from time to time. If we were in a large construction project that could ramp up to add another thousand. Just recently, we probably had a thousand people working on the gas conditioning plant, and about 500 working on the pipeline replacement project from Longford to Long Island Point. So we actually deal with multiple groups of employees and contractors frequently.

Senator CAMERON: That's fine.

Mr Owen : I'll go on to address your question. There are two points to that. One point is: how do we feel about it? I feel very good about it. I think, ultimately, we are a good corporate citizen. I think we're looking after our people, but, as part of our contracting strategy, we will tender contract services from time to time. The main contract services, if you look at Bass Strait in particular, we would contract out—and we have typically done so since the beginning of the business there—catering, inspection and general maintenance contractors. When we do that we go to the market and we look for competitive rates, and we will tender that work. In the particular case that you're referring to—nearly a year ago—we tendered that activity. The company that had been doing that work did not tender, and all of the employees who were employed by that entity were made redundant. The winning company then had to come in and mobilise a workforce, and many of the people who had worked for the previous company chose not to work for them.

Senator CAMERON: I'm not surprised because five casuals determined the basis of the agreement. It was five casual workers, is that correct?

Mr Owen : I don't know.

Senator CAMERON: You don't know, but you're very comfortable with it, you said. The new agreement cut wages by 30 per cent or more, cut annual leave entitlements, cut allowances, cut workers shift loadings, introduced new stand-down causes and introduced a harsh antifamily roster, and that's all terrific. You're very comfortable with that; it's all care and no responsibility.

Mr Owen : No, it's highly responsible.

Senator CAMERON: It's highly responsible, is it?

Mr Owen : Just before we go on though, can I just check with the chair that he's happy to move into this area rather than to continue on with tax.

Senator HUME: Chair, I have questions about tax.

Mr Owen : I just want to ask. I'm actually happy to speak to Senator Cameron at any time.

Senator CAMERON: I'm happy to meet with you. I'm happy to discuss with the unions and you what we do to fix this nonsense, because you can't come here and argue about corporate responsibility and you can't come here and argue about morality when you're very comfortable with cutting workers' wages and conditions to the extent that you've done through a shonky deal. You can't do that. If that's how you behave industrially, I'm concerned that your tax approach would be similar. That's why your reputation gets smeared, because you sit back and allow this to happen.

CHAIR: Would you like to respond to that, Mr Owen?

Mr Owen : Yes, sure. So specifically one of our responsibilities as the custodian of the Australian people's resources is to make sure that we can develop—and you can see from the financial accounts that the company hasn't been actually making a lot of taxable income recently—

Senator CAMERON: When did you become the custodian? We're the custodian.

Mr Owen : I said we're managing—

Senator CAMERON: You said you were the custodian. We're the custodian. You simply extract it and you extract it on the basis of ripping workers off. That's my problem with you.

Mr Owen : Well, I think you're completely incorrect.

Senator CAMERON: Well, just look at it. Would you like your wages cut by 30 per cent? Have any of your executives had a 30 per cent wage cut recently?

Mr Owen : There hasn't been anyone who has been given a 30 per cent wage cut. We have contracted out services—

Senator CAMERON: Yes, with a 30 per cent reduction.

Mr Owen : Just to put this in perspective: one of the reasons why is that there is a lot more competition in the workplace at the moment. I will just put Bass Strait in perspective. The oil and gas industry really started in Bass Strait. Many of the people who have been trained around the country in oil and gas operations were trained in Bass Strait and then have gone on to other parts of the business. In recent times we've gone through a resource boom with a number of megaprojects that have been constructed. That has increased the qualified workforce around the country. Many of them are coming to the completion of projects, which means that the entire Australian contracting community is much more competitive than it was previously. That is one of the reasons why as a business owner we are tendering out a lot of these services to make sure that we are getting competitive prices relative to the rest of the Australian community.

Senator CAMERON: But has any executive in Mobil Australia had a 30 per cent reduction in their income?

Mr Owen : I would very much doubt it, but there probably have been some who have been—

Senator CAMERON: Yes, it's only the blue-collar service workers who have had a 30 per cent reduction.

Senator HUME: Chair, we really are wading into industrial relations issues here, which are not necessarily appropriate to either this particular inquiry or this committee.

Senator CAMERON: I'm happy to take up Mr Owen's offer. I'm happy to sit down and have a discussion with you, because you should resolve it, you should look after Australian workers and you shouldn't leave these workers the way you are. It's outrageous.

Mr Owen : I will make one point here. We've been actually negotiating for quite some time with plenty of parts of our workforce, so I think that we actually do know how to manage and look after a workforce. There are parts of time when we do need to contract out services, and we will continue to contract out services to make sure that we are getting competitive rates. It's not just a rate question; it's actually about bringing in some times new technology, new processes and new approaches to doing work. We can't become a stagnant part of society that basically doesn't actually innovate and become more creative. We're in a very difficult business as we get to the tail end of a lot of oil and gas fields where we need to have significant change. We need to bring innovation to it, otherwise we're going to go out of business very quickly and we're going to end up importing significant amounts of—

Senator CAMERON: What's innovative about a 30 per cent wage cut? That's not innovation. What's innovative about a 30 per cent wage cut?

Senator HUME: Chair, I am really hoping we can get back to tax so other senators can ask questions that are pertinent to this particular inquiry.

CHAIR: Mr Owen has, quite sensibly, taken up the option of responding to some of these issues because these are concerns in the Longford community in particular. I am aware of that, Mr Owen. Exxon wants to be seen as a responsible corporate citizen. These recent developments have cast some doubt over that. In order for us to move on, Senator Cameron has suggested a separate discussion. Would you—

Mr Owen : Happy to meet with Senator Cameron.

CHAIR: Okay.

Senator CAMERON: Can I publicly indicate that I appreciate that.

CHAIR: I'm conscious that the deputy chair has a couple of questions to ask.

Senator HUME: A lot of the questions that I had for ExxonMobil have in fact already been answered on the record. But I do want to clarify a couple of issues, and also allow you a chance to respond to some of the comments made by earlier witnesses. The Tax Justice Network has accused ExxonMobil of misleading the Senate and dodging tax obligations. Would you like to respond, for the record, to that accusation?

Mr Owen : Thank you. I think I tried to address this at the very beginning. The accusation by the Tax Justice Network was that we misled this committee. I clearly say that we have not misled this committee. We have answered truthfully all of the questions that have been put to us, and, therefore, we find the accusation very disappointing, as we've already covered.

As it comes to tax questions, we have a long and proud history of being a contributor to tax in the country. I won't necessarily go over all the numbers again, but, if you look over the last decade or so, we have averaged about 50c in the dollar in terms of tax paid. We're just in a unique period in time where we've invested a significant amount of money that puts us in a non-tax-paying position for the next few years.

Senator HUME: Ms Cato, from Publish What You Pay Australia, suggested that the investments that you have made in Australia lack credibility. Would you like to respond to that?

Mr Owen : I found it extraordinary. That's why I did point out that we're not talking about fictitious projects here; we're talking about massive amounts—thousands of tonnes—of steel being constructed. When you look at how many people were employed in building the Gorgon project at Barrow Island, it's taken, if you add them all up, 10,000 people—at the peak, they had 6,000 or 7,000 people working on the project. In Kipper Tuna Turrum, we've got up to nearly a thousand people or more working. For those who did go down to Garretts Road to the protest line, we've just completed a gas conditioning plant. If they'd kept going further down the road, they would've seen what was a billion-dollar investment in the gas conditioning plant. These are not fictitious investments; they're all steel and concrete constructions that are going to be vital infrastructure for the next five to six decades.

Senator HUME: The ACTU suggested that ExxonMobil's intercompany loans are not at market rates. You have already mentioned potentially the rates that you are paying, but would you like to respond specifically to the ACTU's claim?

Mr Owen : I think we've already covered the rates, but I do thank you for the question. But I would point out that they're slightly lower than my home loan.

Senator HUME: I am reluctant to wade into industrial relations, but, considering Senator Cameron has opened this portal, I think we will dip our toes in the water. Senator Cameron has called you, on the record today, unscrupulous and unethical in regards to industrial relations and suggested that that potentially reflects on your tax arrangements. Would you like to respond to that?

Mr Owen : I think it's not true. We are happy to meet with Senator Cameron to sort out our differences of opinion on the matter. We have a very long and proud history—

Senator CAMERON: I'd like to resolve the dispute, not sort out differences.

Mr Owen : in the Longford and the Sale community. We've been an active member of that community, contributing to not only the social framework but a lot of the funding around hospitals and schools. It's a very valuable part, and it's a part that we take great stock in. Even though we may have a number of people that are feeling alienated as part of that, we hope that, ultimately, if they're skilled labourers, they will come back into our workforce because the community's a very important part of our overall approach to running an operation which isn't a fly-by-night operation—we've been there since 1965.

Senator HUME: That would suggest that you fundamentally disagree with the ACTU's accusation in their opening statement that you are a rapacious employer and a bad corporate citizen.

Mr Owen : I totally disagree with that. I would point out that we've continued to negotiate with relevant unions over the entire history of Bass Strait. At different times we've been in different disputes as we have looked at different change agendas on both sides, but over that whole period we've continued to have a constructive relationship with a lot of unions with previous members here—the ETU, the AMWU and the AWU. Hopefully, we can continue to work constructively with all three of those unions and any of the other unions, particularly at the refinery. We provide long-term and high-paid jobs.

Senator HUME: Throughout the debate on company tax, whether it be how it is applied or at what rate it is applied, I think we have seen a fundamental misunderstanding in Canberra, in the media and among the public as to how corporate tax is potentially applied—an Albericiesque misunderstanding of corporate tax. I'm wondering whether you can explain why ExxonMobil has been targeted specifically by the commentariat, including activist networks?

Mr Owen : We've heard some of it today. There may be some accusations around the world or within the sector; we're simply targeted because we're part of the industry. ExxonMobil is a large company that naturally attracts some of that social media and social agitation. I think we are also seeing some targeting because it exerts pressure on the industrial relations situation.

Senator HUME: Given the criticism directed at ExxonMobil over its disclosure of its tax affairs, whether current or previous, do you think ExxonMobil has an intention, from now on, to go above and beyond what is required by legislation to disclose to be more transparent in the future?

Mr Owen : I believe we are. As you can see, even though we've had mixed reception from our tax fact sheet, we have provided charts that provide much greater granularity than would be required by law or by the tax office. As I mentioned earlier, we are clearly following along with the Australian Taxation Office on the voluntary tax transparency and continuing to stay engaged as a stakeholder in the extractive industry transparency initiatives.

Senator HUME: Just on the tax fact sheet, the Tax Justice Network has suggested that that particular document was 'strong on rhetoric but weak on substance and facts'. Would you like to respond to that criticism?

Mr Owen : We have probably covered a lot of those points before, but it does clearly outline the payments we've made. It has a table in it that explains exactly the taxes we are collecting other than company tax, including excise, GST, withholding tax, local government taxes. While they may not be considered company tax—we heard a lot of that discussion before—they are all represented in the revenue number that is also being compared. They're all part of the $7 billion of revenue. In that we collected $1.5 billion of excise for the federal government. We wouldn't pay tax on the excise that we are collecting for the government. There's just a misunderstanding. Part of the problem lies with some efforts for increased transparency where a revenue number, a taxable income number and tax paid number are not enough to tell the story. It has created more concern within the community because no-one understands what the numbers mean anymore. We're quite pleased to be able to provide slightly more information, particularly to the committee, to make sure they do understand.

Senator CAMERON: Just on that, when do you expect to make any PRRT payments on your 25 per cent interest in Gorgon?

Mr Owen : On the initial funding basis, I think we're looking at paying resource rent tax around 2025. The project costs ended up costing significantly more and that means that it's unlikely that it will pay PRRT until the mid-2030s, depending on price, obviously.

Senator CAMERON: The increase in the project costs were controlled by Exxon and you guys?

Mr Owen : We're not the operator. So if you have any specific questions about the actual investment, it's probably better to be directed at Chevron.

CHAIR: I've just got some questions about the ATO. I know Senator Kitching has some other questions. Is it true that the ATO hasn't approved your last decade of tax filings?

Mr Brown : That is a misstatement. The ATO never approves filings. The ATO reviews and either takes action or not. That comes out of a disclosure in our US disclosures. They are open years, so those years are still able to be challenged by the ATO. The bulk of them relate to minor amendments, all of them under $50 million, where they have been made in the last few years. Those amendments are still open, but the rest of the year is still closed.

CHAIR: So it's fair to say they haven't been closed off by the ATO?

Mr Brown : I would say the ATO never closes anything off. It's closed off by matter of law. As a matter of law, the ATO is still able to look at parts of those returns.

CHAIR: Is it unusual for a company to have 10 years worth of filings open?

Mr Brown : No.

CHAIR: Are there other jurisdictions where Exxon has outstanding tax filings where the equivalent—

Mr Brown : I would assume so, but I will take it on notice.

CHAIR: Thank you for that. Under the previous Labor government, there was an attempt to introduce tax transparency measures that required annual disclosure of corporate income tax payments. Did your company oppose that measure?

Mr Brown : I don't think we opposed it. We were neutral.

Mr Owen : None of us are aware.

CHAIR: If you could take that on notice. There is a proposal for mandatory disclosure for resource companies in Australia and public country-by-country reporting for all multinationals. Do you support that level of transparency?

Mr Owen : We certainly support increased transparency. I am not exactly sure what is involved—

Mr Brown : On that specific item, no. That's because that is commercial-in-confidence information. If it was disclosed publicly the ATO would never receive the information, because on the other side there is a requirement for confidentiality to be able to disclose it.

CHAIR: In terms of your statement, this is something that personally I found remarkable: in your disclosure, you sought to include the employee income tax as part of the declaration as to what range of taxes ExxonMobil pays. You include the employees' income tax at $114 million. Maybe misleading is a harsh word, but it certainly throws in a red herring and doesn't really shine a light on what people want to know, which is how much is the company paying itself.

Mr Owen : I take the point. This comes back to the point I was making before, which is the numbers that are trying to be explained are a little bit misleading in the first place when we talk about $7 billion of revenue even though that revenue includes excise as well. I can understand the point.

CHAIR: I understand Senator Kitching wants to ask some questions.

Senator KITCHING: Mr Owen, I am just looking at the Hansard from the Senate inquiry in November 2015. I don't have the advantage of having the opening statement you gave earlier, but in 2015 it says in the Hansardthat you said:

Today, with a total investment of over $20 billion …

You have said $40 billion today. So in the last two and a bit years, that credit has doubled?

Mr Owen : Yes, it's a good question. It's one we have continued to struggle a little bit with. When we talk about the $20 billion, we were really referring to the near term.

Senator KITCHING: Sorry, to the—

Mr Owen : The near term. Really only in the last eight or nine years or so. It didn't actually reflect the total investment we have made over the past 122 years. We have attempted to try to capture that. What is the total amount—

Senator KITCHING: What was the name of the company in—did you say 1965?

Mr Owen : Yes, we have had plenty of different names, but Plume. We started as a Mobil affiliate, bringing in lube oils and kerosene into Melbourne out of a Queensberry office.

Senator KITCHING: From Standard Oil, was it?

Mr Owen : It wasn't Standard Oil, but it was Vacuum Oil.

Senator KITCHING: In 2015, you talked about the Gorgon project and some other projects, and said:

… that will lead to significant revenues for the Australian economy …

You have said something similar today. Mr Brown has said that it's in 2021. When you are talking about revenues for the Australian economy in 2015, do you mean what I think Mr Brown means today, which is that you will start paying some company tax in 2021?

Mr Owen : Yes, the reference there is into the future. The Gorgon project will probably go for six decades or more.

Senator KITCHING: Mr Brown, you said $600 million from 2021.

Mr Brown : It ramps up. By 2023, it's about $600 million on current prices.

Senator KITCHING: What is it in 2021, given you have said that's when you will start paying company tax?

Mr Brown : I'll have to go back. I haven't got the exact number in my head.

Senator KITCHING: Can you take it on notice?

Mr Brown : I can take it on notice.

Senator KITCHING: It would be good to pin down—

Mr Brown : That number is an estimate.

Senator KITCHING: I just don't like things based on the never-never.

Mr Brown : That's fine. It's an estimate based on last year's prices.

Senator KITCHING: Can I just go to the Netherlands company. I've got here a profile of the company, an extract. I presume you've met these people, because they are the shareholders in the Australian entity: Pieter Huisman, who is a director; Antonius Jozef van der Linden and Jan Louis Alfons Michielsen. Have you met them?

Mr Owen : I have not met them.

Senator KITCHING: They are the owners of your company, you have not met them and you are the CEO?

Mr Owen : They are the shareholders of the company. Just a reminder of what we are: we are the directors of an Australian entity. We recognise all revenues generated in Australia and we pay your tax.

Senator KITCHING: I understand what you're saying.

Mr Owen : If actually have a dividend, then we will pay it back to the shareholders.

Senator KITCHING: You would pay it to these three gentlemen. What do they do?

Mr Brown : Can I just make one comment: we would not pay it to those three gentlemen. We would pay it to that company. In the end, that is beneficially owned by ExxonMobil Corporation and we do know people in ExxonMobil Corporation who are responsible.

Senator KITCHING: Who are these three? Are they just professional shareholders, as some companies—

Mr Brown : I assume they will be senior executives in the Dutch affiliates. We can take it on notice, if you wish.

Senator KITCHING: Yes, I would like to know. Perhaps you could send the LinkedIn profiles as well.

Mr Brown : If they are on LinkedIn.

Senator KITCHING: They seem pretty anonymous for three gentlemen who are shareholders in an entity that is owning, as you have said, quite a substantial business.

Mr Owen : Just to come back on that, I recognise the point you are making. But, again, we are an Australian entity. We recognise all revenue in Australia, we pay tax in Australia—

Senator KITCHING: Mr Owen, I understand what you are saying.

Mr Owen : and the beneficial shareholder in the end is ExxonMobil Corporation.

Senator KITCHING: But you can understand why there are some questions around the transparency regime under which ExxonMobil operates, given that you have not actually met the owners of the company that owns you. You have not met them and you are the CEO.

CHAIR: Can you answer to us why an American company seeks to have a Dutch intermediary company owning the Australian business?

Mr Owen : I am not sure that I can, because it's actually matter for the corporation rather than for us as an Australian entity. I would point out that over time we have actually grown up: there are lots of different companies and there are lots of acquisitions of different organisations. A lot of our structure stems actually out of the merger of Exxon and Mobil back in 2000.

Senator CAMERON: If you don't understand it, how do Australians understand it? How does the ATO—if you don't understand, how do—

Mr Brown : It makes no difference to the Australian tax position, whether they're owned in Holland, whether they're owned in Singapore or whether they're owned in the Bahamas. It makes absolutely no difference to our Australian tax profile.

Senator CAMERON: That's what you're saying, but the OECD has a different view on some of this stuff.

Mr Brown : No. The OECD doesn't talk about ownership it talks about profit shifting, and we're not profit shifting. We have no transactions with those companies.

Senator CAMERON: That's your claim. We've got no proof that you're not profit shifting. What is the proof that you're not profit shifting? How do you prove that? How do we assess that?

Mr Brown : Maybe you should ask the tax office when they come in.

Senator CAMERON: No, I'm asking you.

Mr Brown : Can I give you an anecdote? I was waiting in reception, this morning, to come into this meeting and the receptionist said, 'Where are you going?' I said, 'I'm going to a Senate committee on tax avoidance.' She said, 'Oh! They should ask me. Our most frequent visitor to the office is the tax office. We're under constant scrutiny.' We have very tough anti-avoidance laws in Australia. We operate under a very strong tax regime. My primary job as tax manager is to make sure we comply with that; it's about making sure we pay the right amount of money on time and we file the correct returns on time. And then, when we file them, the ATO scrutinises them.

Senator KITCHING: Does your owning entity, the Netherlands company, scrutinise—so you never have any contact with them?

Mr Brown : No, it's not relevant.

Senator CAMERON: Well, why is it there?

Mr Brown : We can give you an answer on notice.

Senator KITCHING: You're going to come back to us on that?

Mr Brown : Yes.

Senator KITCHING: Thank you. You would agree—you're here, so I would assume—and I'm aware of the colloquial definition of 'assume', that it makes an ass of you and me—that you're aware of the reputational damage that's done to ExxonMobil by your not paying—I think you said, Mr Brown, you haven't paid company tax for eight years.

Mr Brown : We haven't paid it since 2013.

Senator KITCHING: But you understand that there is reputational cost in that.

Mr Owen : I would just say that I think that we would recognise that misunderstanding the data could lead to questions about reputation, which is one of the reasons we've gone to pains to provide significantly more data, here, to demonstrate what kind of taxpayer we are. In the end, reputations can probably be argued in the social media and the media and all of those—I will just say it again: we have been, actually, a very long-term investor in this country since 1895. We have been paying taxes, and considerable taxes, and funding significant parts of the Commonwealth government's spending program—

Senator CAMERON: It's not been a one-way street, has it? You've made significant profits.

Mr Owen : Nearly all of which is being reinvested in the country.

Senator KITCHING: But where you have paid the dividends, they've gone to the Netherlands. So how long—

Mr Owen : Ultimately, they flow to the corporation.

Senator KITCHING: Yes, via the Netherlands, so those dividends don’t stay onshore.

Mr Owen : And we haven't paid a dividend for the last nine or 10 years.

Senator KITCHING: You haven't paid any company tax, so I understand that.

Mr Owen : That's not true; we pay company tax.

Senator KITCHING: Sorry, for the last few years, you haven't paid—

Senator CAMERON: And won't be paying any until—

Senator KITCHING: Until 2021. Could I just go to your standards of business conduct and under that there are some—

Senator CAMERON: Just before you do, on this issue, you've been keen to tell us how much tax you've been paying. Can you also provide us with how much profit you've been making in Australia?

Mr Brown : That's—

Senator CAMERON: Sorry?

Mr Hardgrove : It's published every year as part of the ASIC filings.

Senator CAMERON: I don't read that every year, so can you provide that to us?

Mr Hardgrove : It's publicly available.

Senator CAMERON: So you're not prepared to put it together for us.

Mr Hardgrove : We can provide the information.

Senator CAMERON: That's all I've asked; that's good.

Senator KITCHING: In the guiding principles, under 'Communities', it says:

We commit to be a good corporate citizen in all the places we operate worldwide. We will maintain high ethical standards, obey all applicable laws, rules, and regulations, and respect local and national cultures. Above all other objectives, we are dedicated to running safe and environmentally responsible operations.

As you sit here today, are you comfortable that Exxon is in compliance with this guiding principle?

Mr Owen : ExxonMobil Australia?

Senator KITCHING: Yes.

Mr Owen : Yes, I am.

Senator KITCHING: Okay. I want to come back to something I think you said before, but I want to go to your ethics policy. So you're comfortable that Esso is in compliance with—and I read this to Mr Ward before:

Even where the law is permissive, the Corporation chooses the course of highest integrity. Local customs, traditions, and mores differ from place to place, and this must be recognized … A well-founded reputation for scrupulous dealing is itself a priceless corporate asset.

But do you think that anyone in Australia really thinks that of Esso Mobil Australia?

Mr Owen : I certainly do. I think that we would have quite a large number of our employees that do. I think that quite a large number of our community do. I think quite a number of our key stakeholders within community groups, within local government, within state government and within the federal government do.

Senator KITCHING: I want to come to meetings you might have had with federal government ministers, but do you feel that the locking out of employees for such a long period of time is an ethical practice? Do you think that's a good way to resolve a dispute?

Mr Owen : The people on the protest line—just to be clear—and the former UGLK employees are not locked out. Their contract was terminated. The company dissolved and they were paid redundancy.

Senator KITCHING: Because, you, Mr Owen, I think before said—and you conflated—that perhaps this inquiry into corporate tax or the payment or nonpayment of corporate tax is really to influence an industrial relations agenda.

Mr Owen : Yes, I said that it maybe one of the drivers.

Senator KITCHING: I've asked you about your ownership regime. That has nothing to do with industrial relations; that's about how you have set up an entity and a corporate structure. Certainly, I think, if anything, the implication would be that what you're doing in the Bahamas is to avoid paying tax.

Mr Owen : I will just say again that, as we're an Australian entity, all revenue generated in Australia is recognised in Australia and taxed in Australia.

Senator KITCHING: Yes, and Mr Brown has also said that you spend a few hundred thousand on external legal advice. Is that correct?

Mr Brown : Yes. But that's an average.

Senator KITCHING: That is a lot of QC's advice.

Mr Brown : Have you spoken to a QC recently? It doesn't go very far.

Senator KITCHING: I have spoken with a QC recently, and, even for QCs that specialise in giving tax advice, it's still a lot. And 14 people in a tax department—there would be some law firms that would not have that many.

Mr Brown : Can I just state what most of my people do?

Senator KITCHING: Yes, I would be very interested.

Mr Brown : If you go to the tax fact sheet, it lists all of the taxes we pay. Most of it is dealing with that—

Senator KITCHING: I'm not asking about that. You just said that you would give us an understanding of what the people in the tax team do. I can read the fact sheet later.

Mr Brown : But I am going through that. We pay $1.4 billion of excise. People have to look after that. We pay $500 million a year in GST. People have to look after that. We pay land tax. We pay rates. We pay withholding taxes. They all need people to do that work.

Senator KITCHING: You have a lawyer dealing with your rates issues.

Mr Brown : I'm a lawyer.

Senator KITCHING: Likewise.

Mr Brown : But most of my group are accountants, not lawyers. Of the 12 people, almost all of them are accountants. They are doing compliance work.

Senator KITCHING: Did you say 14 before or 12?

Mr Brown : 12. They're generally accountants. There are a couple of lawyers in the group; I'm one of them. And we are generally filing returns with the tax office or the state revenue office.

Senator KITCHING: What are you spending on the external advice?

Mr Brown : It depends what's going on at the moment. As I think Richard said at the start, income tax laws are complex, and petroleum resource rent tax has areas of uncertainty, so there will be times when you'll have areas of uncertainty and you want to get guidance on the correct way to apply the law: 'How should this be dealt with? How should that be dealt with?' It's as simple as that.

Senator CAMERON: While we're on this, can I just ask you something. I just noticed here, on the graphs that you've laid out, you're saying you're being far more open. The income tax payments go back to 2002, the PRRT goes back to 2004, the revenue base goes to 2007 and the investment goes back to 2003. Why did you pick those dates and why are all those dates different?

Mr Brown : Part of that is just the availability of data. The longer you go back, the harder it is. Some data we have more readily available; some is harder to find.

Senator CAMERON: Shouldn't we go back to those documents Mr Hardgrove said were there?

Mr Brown : For the accounting records, we can give you accounting profit for a long time back.

Senator CAMERON: Okay.

Senator KITCHING: Have your human resources team or human capital team, or whatever you call that part of ExxonMobil, spoken with the employees whose 'contracts were terminated'—let's say, to use some neutral language. Have you spoken with them? Have you spoken, Mr Owen, with them? Did you go down there to speak with them? Did anyone from the human resources team do that?

Mr Owen : No-one from our human resources team would have spoken to them. Remember they're not our employees—

Senator KITCHING: But you've contracted someone—

Mr Owen : Contracted through a company—

Senator KITCHING: Through UGL.

Mr Owen : Through UGLK which no longer exists, which was a joint venture arrangement between UGL and KAEFER. And those people that were working for UGL KAEFER got to the end of the contact. The contract term was seven years. We tendered the contract. UGLK did not tender on the contract. About five to seven companies from around Australia did get on it, and we awarded the bid based on a whole range of measures, including safety and performance, and cost ultimately. So, no, our employment relations people have not—

Senator MARSHALL: But, in effect, they are the same company.

Senator KITCHING: Is it a phoenix company?

Senator MARSHALL: Again, it was one of these ownership shams that go on, wasn't it? It was the same company.

Senator KITCHING: Has it wound up?

Senator MARSHALL: Same management structure, same people.

Senator KITCHING: UGLK has wound up, has it?

Senator MARSHALL: They moved across the road to an empty building for a couple of days and then moved back.

Mr Owen : Yes, it's wound up.

Senator KITCHING: Now, as Senator Marshall is suggesting, it is now effectively the same management structure in a different entity?

Mr Owen : No, it's not the same. It's just confusing that it has the same name. But I'm not sure if that was your actual question.

Senator KITCHING: What I would firstly like to know is was everyone paid out all of their—

Mr Owen : My understanding is that they were all paid redundancy at the end, if they were eligible for redundancy.

Senator KITCHING: So UGL is deregistered, is it?

Mr Owen : I'm not aware whether they were registered or a venture—

Senator KITCHING: But they were a contractor of yours? You had a legal relationship with them?

Mr Owen : Yes. Absolutely.

Senator KITCHING: Yes. So that contract terminated? That company terminated? It wound up?

Mr Owen : I believe it has wound up.

Senator KITCHING: Maybe Mr Hardgrove—

Mr Hardgrove : I thought it was an unincorporated joint venture. I don't believe it is a registered company.

Senator KITCHING: Right. It's a joint venture vehicle, is it? I would have to check.

Mr Hardgrove : I believe so.

Senator KITCHING: And what's the new company? That's just UGL, is it? Is that a joint venture as well?

Mr Owen : No, it's not.

Senator KITCHING: So the former company was a joint venture vehicle. So it was part-owned by Mobil—

Mr Owen : No, no—

Senator KITCHING: No? What was the ownership of it?

Mr Owen : It was between an unincorporated joint venture between UGL and KAEFER. They're two construction contractors or maintenance contractors.

Senator KITCHING: So was it an unincorporated association, was it?

Mr Owen : We'd have to take that question on notice as to exactly what they were. But they bid on the work seven or eight years ago and they won the contract. The contract ran for seven years. We then retendered the contract. UGLK did not tender. Seven-ish companies—I can't remember the exact number—tendered on the work, and then it was awarded to a new contract.

Senator MARSHALL: The other half of the joint venture [inaudible]. It's a sham. It was an absolute sham, wasn't it?

Senator KITCHING: If you could come back to us, because I would be very interested to know what kind of legal entity it was. I would like to know if it an unincorporated association, because I would find that a very odd structure to put in place. I would like to see that, and I would like to see the ownership model of it and how you contracted with them. That's terminated and now you've got this other company that has contractors. They are not employed, are they, by UGL. They are all contractors, are they?

Mr Owen : My understanding is that it is a mix of people and they're currently converting them through to employment contracts and going through rep rights and a number of bargaining meetings as they get everyone on board on the contract, including engagement with the unions.

Senator KITCHING: I want to come to some things about the federal government in a moment. The founder of Standard Oil, John D Rockefeller said:

The ability to deal with people is as purchasable a commodity as sugar or coffee and I will pay more for that ability than for any other under the sun.

What do you think John D Rockefeller would make of ExxonMobil's arrangements with contractors and the decision not to pay company tax in at least the last few years while it has been extracting tens of billions of dollars of value?

Mr Owen : I'm not going to be able to answer your first question, because I don't know what JD Rockefeller would have said or thought; so, I can't speculate on that. On the second thing, we didn't make a decision not to pay tax. We are not in a tax-paying position. It is not a choice. We are basically following, as you would expect, all of the tax laws and obeying all of the tax laws as we go about our business. In terms of how we stand up relative to the expectations of the founder, I think he would feel very good about it. I think he would be very proud of what has been achieved by a business that is over 122 years old in Australia.

Senator KITCHING: How would you regard your relationship with the current federal government?

Mr Owen : I think we have a good working relationship with the government.

Senator KITCHING: How many times would you have met with federal government ministers in the last year?

Mr Owen : I wouldn't know exactly, but I would say that, typically, I would probably go to Canberra and meet both government and opposition members three times a year.

Senator KITCHING: Have you met with the minister for resources during the last year?

Mr Owen : Yes, I have.

Senator KITCHING: How many times?

Mr Owen : As I said, probably three, four.

Senator KITCHING: Have you met with the Treasurer?

Mr Owen : Yes, I have met with the Treasurer.

Senator KITCHING: How many times?

Mr Owen : Probably once or twice.

Senator KITCHING: What about the minister for workplace relations?

Mr Owen : I don't think I have met with the minister for workplace relations in the last year.

Senator KITCHING: In the last year—so, before Mr Laundy—it was Senator Cash.

Mr Owen : No, I don't think in the last year I would have met with Senator Cash.

Senator KITCHING: How many times have you met with the opposition equivalent?

Mr Owen : Probably twice—not with workplace relations but with resources and energy.

Senator KITCHING: The shadow Treasurer?

Mr Owen : I have not met with the shadow Treasurer.

Senator KITCHING: Can I just go to—

Mr Owen : I say that we haven't met, but we have offered briefings and had quite a large number of government opposition people there at either breakfasts or other things. I guess we've got one coming up when we do an energy outlook, which we are doing in two weeks time with, I think, both the government and the opposition. Have I addressed your question, Senator?

Senator KITCHING: Yes. I think you said before that you started at Exxon in 1983.

Mr Owen : I did.

Senator KITCHING: I saw an article in the Gippsland Times which said that it was your first job at Longford. That's right, isn't it?

Mr Owen : Yes, other than part-time work.

Senator KITCHING: It also says that you were back—this in 2013—for a function and that you were very pleased to see many familiar surnames on the staff lists at Longford and offshore but admitted the faces were not the same because they might have been the sons or daughters of people you knew, but you've come here with a security guard today. Why did you do that?

Senator HUME: Chair, I am interested to know exactly how this relates to corporate tax.

Senator KITCHING: It does actually relate, because it is the trust—

Senator HUME: I know that you are not a voting member of this committee, Senator Kitching, but, honestly, this hearing is about corporate tax and I think we have strayed enough from the terms of reference of the inquiry throughout this hearing.

Senator KITCHING: Did you do that because some of the family members that you say that you know and respect so much are here, in this hearing room, and you brought a security guard in case something happened?

Mr Owen : No, not at all. We have got the security guard because there was meant to be or potentially going to be a large rally out the front of the building that was being organised by a number of the Make Exxon Pay or—

Senator KITCHING: How is that consistent with the company's stated values to bring a security guard against the people you say are multigenerational employees? They may well have been terminated by now. They might just be contractors. How is that consistent with those stated values?

Mr Owen : I suspect we are talking about two different things. I am not talking about anyone in this room or anything. We are talking about the fact that it was advertised on a number of different websites that there would be a large rally out the front of the building either when we were coming or going. It is only about whether that becomes potentially—

Senator KITCHING: But you say you know those people. You say—

Mr Owen : No. I've got no idea who would be out the front—

Senator KITCHING: You said you know the names and you brought a security guard. Mr Owen—

Mr Owen : I find this an extraordinary line of questioning actually, Senator, because—

Senator KITCHING: What sprang to mind was: what does it profit a man to gain the whole world but lose his soul? You started working at Sale and Longford, and now you have brought a security guard against the employees of the company.

Mr Owen : I think it's extraordinary. I actually spend a lot of time in Sale, a lot of time in the field. I know quite a number of people in the community. I visit our sites on a regular basis. I have plenty of conversations—

Senator KITCHING: Do you have security when you go down there?

Mr Owen : No, I do not, because I don't have rallies that are being prepared specifically for our attendance at this hearing. It is an extraordinary line of questioning to me that—

Senator KITCHING: I think it goes to an indication around relations with your company.

Senator HUME: Senator Kitching, the committee has actually appointed security guards to protect senators as well for this particular hearing, so I don't think it is unreasonable that the witnesses do the same.

Senator KITCHING: I actually do. I think it demonstrates an incredible problem.

CHAIR: Unfortunately, we are out of time.

Senator MARSHALL: Can I just put one question on notice. I think it was partially answered. You have taken on notice the ownership structure below you, the Australian entity. I think you have partially taken on notice some of the ownership structure above you. Can you take on notice and just provide to us the chain of ownership both above and below you, who they are and where they are based.

Mr Owen : We can do that.

Senator KITCHING: One question on notice, because I don't know whether you will be able to answer this. Why did the Treasurer meet with Exxon USA recently?

Mr Owen : My understanding—and feel free to ask the Treasurer direct—

Senator KITCHING: I'm not sure that he would be that disclosive with me.

Mr Owen : I think you will find that I only have, again, the public information, as well as one of the meetings that I referenced that I had had with the Treasurer, which was a pre-briefing before he went over there. He essentially went overseas to get a feeling, I think, about the overall investment climate view about Australia as an investment destination and what was happening in other jurisdictions, particularly what they were doing around the treasury in general in the US. So he met with a whole range of different stakeholders over there, not just with ExxonMobil.

Senator KITCHING: I am not asking about the others, but just if we could have some understanding—

Mr Owen : I will tell you right now. It would have been very similar to the conversation that we have just had. It was essentially about what our history has been in Australia. So we presented what we have been doing in Australia. He would have asked how we feel about its investment climate. We would have talked about how we have these investments that we have discussed today, as well as exploration opportunities. We probably would have confirmed at that meeting concern about the need for fiscal certainty, particularly around our large investments, and making sure that Australia maintains its position as an attractive investment destination.

Senator KITCHING: What do you mean by an 'attractive investment place' and what do you mean by 'fiscal certainty'?

Mr Owen : I did actually cover that before, but it is around making sure that as we enter into some of the very large and significant investments that we are making that we understand what the tax rules are going to be, because a number of those things are being questioned right at the moment—this committee's questioning around taxation and previously this same committee has looked at resource rent tax. So it is clear that a lot of these things are in play as potential things that could change, and we probably would have voiced the concern to make sure that we understood what that was going to look like in the future.

Senator KITCHING: Were the proposed company tax cuts covered?

Mr Owen : Not to my knowledge.

Senator KITCHING: I would be interested to know about that and whether there were any undertakings given by the Treasurer in relation to corporate tax cuts.

Mr Owen : Okay.

Senator CAMERON: Some of you have had discussions with Chris Bowen as well. Some of you have had discussions with the opposition.

Mr Owen : I have only met Chris once; but the bottom line of that question is, yes, I meet with primarily energy and natural resources.

CHAIR: Thank you very are much for appearing before the committee today.

Proceedings suspended from 12 : 04 to 13 : 02