Debt loading, also known as thin capitalisation, is a technique suited to large infrastructure investments, most commonly exploited by the energy and resource sector. Debt loading is a process by which a foreign multinational corporation lends capital to their national operation at an unusually high interest rate. Any profit made in the country is used to repay the foreign subsidiary. For the purposes of domestic company tax records, the profits are recorded as a loss in the form of an interest payment on the loan.
In 2014, energy company Chevron used debt loading to reduce the non-debt worth of its Australian subsidiary from $3 billion to $29 million – a reduction of over 99%. Chevron borrowed over $2.5 billion from foreign subsidiaries, many in known low or no tax jurisdictions. The interest payments on these loans added up to 62.5% of its sales revenue in 2014 and 45% in 2013. The result was that Chevron paid no tax in Australia in 2013-14.