Alumina Limited says its joint venture with aluminium giant Alcoa has been assessed $212 million in back taxes over historical alumina sales to a government-operated aluminium plant in Bahrain.
The Australian Taxation Office has also noted that the compound interest on the tax owed by Alcoa of Australia (AoA) amounts to $707 million, although it has invited the company to make submissions on why that charge should not be fully payable.
The ATO is also expected to assess administrative penalties by August, although Aloca of Australia isn’t in a position to estimate what they might be.
Alumina’s only business is a 40 per cent stake in Alcoa of Australia (AoA), which mines bauxite and refines alumina in Western Australia.
The ATO argues that AoA underpriced its alumina sales over a 20-year period to Aluminium Bahrain B.S.C., one of the largest aluminium smelters in the world.
Alumina’s position is that the sales were the result of arm’s length dealing at prices consistent with those paid by other third-party alumina customers.
“Alumina notes that the ATO is seeking to assess tax on sales revenue which it contends that AoA should have received, rather than the amounts actually received by AoA,” Alumina said.
“Neither AoA nor any related entity received any benefit other than the sales revenue received over the relevant period from an unrelated party.”
In 2014, Alcoa paid a $US384 million fine to settle allegations its subsidiary paid $US110 million in bribes that were funnelled to Bahrain’s royal family to retain the supply arrangement.
Alumina said AoA is planning to dispute the tax assessment, including possibly in court, but will have to pay half of the primary tax amount – about $107 million – as part of the ATO’s dispute resolution practices.
Alumina said that AoA has paid about $3.1 billion in income taxes over the past decade in Australia, with an effective tax rate of about 30 per cent.
At 1208 AEST, Alumina shares were down 5.0 per cent to $1.62.