Thursday, June 02, 2011

The great grain robbery

For some time the revenue authorities in Argentina have been investigating the strange case of the scarcely profitable grain traders. Even when food commodity prices were spiking at record levels in 2008/09, reported profits remained extraordinarily low. Now Felicity Lawrence reports in the Guardian that the Argentine authorities have made their move and charged ADM, Bunge, Cargill, and Dreyfus (known collectively as the ABCD four) with tax evasion running to the tune of hundreds of millions of dollars.

Since 2008 the Argentine tax authorities have been using recently signed tax information exchange agreements to cross-check export prices against prices in importing countries. According to senior revenue authorities these checks have revealed systematic false declarations of sales, occasionally involving phantom purchasers located in tax havens; Uruguay, a prominent secrecy jurisdiction in the Southern Cone, seems likely to have featured heavily in this profits shifting role. At the same time inflated costs have been charged to the Argentine exporting subsidiaries to reduce declared profits and/or claim tax credits.

The ABCD four, who dominate global trade in corn, soya and wheat, have vigorously denied any wrongdoing, claiming their actions rest within the letter of Argentine tax laws, but this case could well become a landmark investigation into transfer mispricing and the role of tax havens in corporate tax abuse. One to watch.


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