Published: 13 Nov 2017
Our National Research Director, Peter Colley, helps to unravel Glencore's dodgy record as revealed by the Paradise Papers:
Glencore’s efforts to improve its image as a responsible global corporate citizen have taken another battering with the leaked release of millions of documents in the Paradise Papers.
It appears that Glencore has systematically engaged in large scale manipulation of its finances to escape tax.
Glencore, originally founded by Marc Rich (who was pursued by US authorities for tax evasion and breaking UN sanctions against Iran), has been attempting to improve its image – but it seems unwilling to genuinely give up its traditional secrecy that enabled it to become “the biggest company you never heard of” (Reuters, 2011) – prior to its public listing in 2011.
Among the Paradise Papers material is that Glencore rented a single room in the law firm of Appleby in Bermuda so that it would have a “robust physical footprint” in the country through which it could wash millions and billions of dollars of transactions in the notorious tax haven.
With respect to its Australian operations the company engaged in a massive $25billion “cross-currency interest rate swap” between its businesses in Australia and those in Bermuda that, while being legal, are of a type under examination by tax authorities around the world because of their ability to be used to transfer profits to low-tax jurisdictions.
Glencore’s exploits go much further. While the company’s annual report and website make no mention of a shipping fleet, it turns out the company has close to a half share in SwissMarine, which owns 11 capesize (ie very large) ships and charters a further 156.
The company now says on its website that its ownership of the ship fleet was kept confidential for “commercial reasons”. Which is probably just another way of saying that the huge commodities trader was better able to close deals with clients because of its preferential but undisclosed access to shipping.
The Paradise Papers also show murky dealings in the Democratic Republic of the Congo (DRC), a country torn by war and corruption. It’s far too complicated to repeat here, but it involves negotiations over the Katanga copper resources (in which Glencore had a large stake) and the use of Dan Gertler, a notorious middle man close to the Kabila regime running the country.
It’s also worth having a look at Glencore’s own document stating its official payments to governments in 2016:
While the company claims to have paid US$814 million to Australian governments in 2016 under its transparency reporting requirements to the European Union, it’s actual company or income tax paid was just US$8m. Most of the rest was for royalties, customs, import and export duties. These payments, based on the actual volume of goods produced and sold, are harder for the company to avoid when compared to the smoke and mirrors that can be used to shift profits from one country to another.
The message might just be that Glencore (and similar multinationals) have every intention of continuing to minimise and avoid paying their taxes, and that governments need to look at very simple, hard to cheat, ways of making such companies pay their due to the countries in which they operate.