Australia's largest coalminer, Glencore, paid almost zero tax over the past three years, despite income of $15 billion, as it radically reduced its tax exposure by taking large, unnecessarily expensive loans from its associates overseas.
At up to 9 per cent, the interest rates on these $3.4 billion in loans were double what the company would have had to pay had it simply borrowed the money from the bank.
As it was claiming tax breaks in Australia on these inflated interest payments, the secretive Swiss-based multinational actually increased its lending to other related parties interest free. This may include its executives. Nobody from Glencore, which used to be called Xstrata, was available for comment despite repeated requests.
The aggressive tax avoidance tactics of Glencore Coal International Australia Pty Ltd have been identified in an independent analysis of the company's accounts for Fairfax Media by an expert in multinational financing.
Along with the blatant irregularities in its borrowing and lending, the study also found a hefty increase in Glencore's coal sales to related companies (up from 27 per cent to 46 per cent of total sales, with no explanation), indicative of transfer pricing - also known as profit-shifting - and an activity that appears to breach Section IVA of the Income Tax Assessment Act - the part that deals with schemes designed to comply technically with the law but whose ''dominant purpose'' is really to avoid tax.
Friday, 27 June 2014
Glencore and (no) tax
In Glencore tax bill on $15b income: zip, zilch, zero Michael West reports on an analysis of Glencoe's accounts and the methods it uses to ensure it doesn't pay tax in Australia.