The Singapore Sling: A Marketing Hub for BHP and Rio Tinto
The Singapore Sling is a gin-based cocktail from Singapore that was developed in 1915 by Ngiam Tong Boon, a Hainanese bartender working at the Long Bar in Raffles Hotel, Singapore. It was initially called the gin sling – a sling was originally an American drink composed of spirit and water, sweetened and flavored.
BHP Billiton and Rio Tinto have been enjoying the Singapore Sling for at least the last ten years. I am not talking about the drink of course, but the use of Singapore as a marketing hub to sell hundreds of billions of dollars of their resources to customers. It has now been revealed that from 2006 to 2014, BHP Billiton sold $US210 billion worth of resources to its Singapore subsidiary. That was then on-sold to customers for $US235 billion — a $US25 billion mark-up over eight years. After expenses, the Singapore marketing hub was left with a $US5.7 billion profit over those eight years. The Singapore marketing hub is attractive to Australian companies due to Singapore’s low tax rates plus its proximity and closeness to Asian customers.
Marketing hubs, including the Singapore Sling, are a huge concern to the ATO. Whilst the ATO accepts there are legitimate business activities being conducted in Singapore, it is disputing the amount of profit attributed to the marketing hubs of several firms and whether the profits attributable to the Singapore hubs are reasonable.
BHP Billiton and Rio Tinto have revealed through the Senate inquiry they have been issued amended assessments for tax, interest and penalties of $522 million and $107 million respectively. Does this mean its last drinks time for the Singapore Sling?
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2