BHP to fight biggest tax bill

BHP Billiton, the mining group, has received a tax bill of nearly $A1bn (£425m) from the Australian government, the company said yesterday.

BHP shares fell 7.5p to 703.5p yesterday after it revealed it had been issued with one of the biggest tax assessments in Australian history.

The Australian tax office claims BHP Billiton Finance, a subsidiary of the group, owes $A570m in unpaid tax. It is demanding a further $A365m in interest and penalties.

The assessment relates to BHP Billiton Finance's 2000, 2001 and 2002 returns, where it sought to deduct investment write-offs from its tax bill.

BHP said it would "vigorously" defend its tax claims. It has taken legal advice and is confident of its position. The dispute is likely to end up in the Australian federal court and drag on for several years.

It is believed the tax deductions in question relate to BHP's Beenup mineral sands project, which extracted titanium dioxide to make white pigment, and its hot briquetted iron processing plant in western Australia. Both projects, which date back to the late 1990s, suffered severe technical problems.

BHP said it had made adequate provision for the tax assessment in its accounts, but must decide whether to make a one-off cash payment within the next 30 days to avoid further penalties.

"It's important to note these assessments won't impact our operations, investment programme or ability to pay dividends," a BHP spokesman said.

The Australian tax office has been cracking down on corporate tax write-offs of failed investments. It is also pursuing the National Australia Bank, St George Bank and chemicals company Orica.

This is not the first time BHP and the office have disagreed. In 2002 the miner won a long-running dispute over deductions relating to its 1983 purchase of coal miner Utah International.