Rio Tinto could seek a court challenge in its stoush with the Australian Tax Office (ATO).

The ATO alleges that Rio has used subsidiary companies in Singapore to reduce the tax it pays in Australia through ‘transfer pricing’, allowing it to shift over $447 million that should have been paid in tax to offshore accounts.

Rio Tinto has now released a report on the taxes and royalties it pays in Australia, which it says shows a commitment to transparency while bringing the economic contribution it makes to public attention.

The report addresses Rio’s “international related-party dealings” with its iron ore trading hub in Singapore.

The trading hub, colloquially known as the ‘Singapore Sling’, is central to the dispute with the ATO.

“Yes, we have an ongoing disagreement with the tax office over the prices we pay our Singapore office for services provided,” Rio Tinto spokesperson Ben Mitchell said.

“Services like marketing, contracting, shipping, invoicing and procurement.

“We received a tax bill of around $440 million over the period in question (2010–2013). Over the same period we paid $25.5 billion in taxes and royalties.

“Obviously we don't agree with the latest ruling by the tax office, and all things being equal, it will very likely lead to a court challenge.

“It's an unfortunate outcome, but Rio Tinto thinks the tax office has overcooked this latest assessment, so we'd like to clarify a number of items in their claim against us.”

Rio says it pays its fair share, including $1.5 billion in royalties for Western Australia over the 2016 financial year, and a combined $520 million in royalties for Queensland, New South Wales and the Northern Territory.

But royalties are not a tax, and mining companies are often criticised for lumping taxes and royalties together as a sign of economic contribution.

The left-leaning Australia Institute think tank has led the call to separate the single figure for company taxes and royalties.

But Australia Institute head of research Roderick Campbell says Rio’s report on taxes paid is a positive sign.

“I applaud Rio Tinto for publishing this. I believe BHP Billiton does and I hope other mining companies will follow suit,” he said.

“But the problem isn't with the taxes that are paid, but the taxes that aren't paid.

“The key to transfer pricing is to sell your own commodity, in this case iron ore, to a related entity in a different country.

“What you're able to do is say sell your Australian iron ore to yourself, at say $50 tonne in Singapore.

“So you might be making a loss in Australia, but your company in Singapore or wherever, can then sell it on to clients at say the market price of $70 tonne.

“So the profit gets registered in Singapore, not in Australia, and the company tax rate in Singapore is a lot lower, around 15 per cent.

“So companies can effectively transfer the profit to those lower taxing destinations.

“It comes down to tax avoidance rather than tax evasion,” he said.

Rio Tinto rejects claims it engages in tax avoidance.

“The company tax rate is lower in Singapore at around 10 per cent,” Mr Mitchell said.

“Obviously, at 30 per cent, the Australian tax rate is considerably higher, but we're getting value from the Singapore office.

“It actually increases the price we get for our iron ore and that flows back to Australia through higher profits and higher taxes.”