When it comes to paying tax, Glencore — reported to be kicking the tyres at Rio Tinto despite the dearth of interest at the latter — is the closest thing you’ll find to industrial-scale evil on the planet. The company is headquartered in the Swiss tax haven of Zug and is best understood not as a resources trading house, which it used to be, or a mining multinational, which it now claims to be, but as an entity primarily dedicated to tax dodging, which just happens to dig up and sell stuff.
Fairfax’s Michael West, who has diligently pursued the scandal of corporate tax dodging in Australia, often in the face of corporate aggression, at one stage explained earlier this year how Glencore had paid zero tax in Australia — until an outraged corporation forced Fairfax to make a correction because it had paid $400 million in tax over three years. Thus, by its own admission, it paid a tax rate of less than 3% on its income for that period.
Glencore has a long history of avoiding its tax obligations through the use of those favourite tools of the multinational tax dodgers, transfer pricing and overpriced loans between subsidiaries to net off profits. In the UK, Glencore used complex insurance products to reduce its tax bill by tens of millions of pounds. All in a day’s work for the tax dodgers of Zug, working for an outfit founded by one of the doyens of US white collar crime, Clinton mate and tax evader Marc Rich.
All companies look to minimise their taxation obligations of course, but Glencore’s efforts tip over into outright evil: in 2011 it was found to have used transfer pricing to rort Zambia of hundreds of millions of dollars in tax revenues from copper mining. Zambia is one of the poorest countries on earth, and Glencore’s tax dodging meant poorer health and educational outcomes for some of the planet’s poorest people.
Zambia was also, by the way, held up by the mining lobby here as a great example of how to properly tax mining companies during the debate over the Rudd government’s resources tax; Tony Abbott even claimed Zambia was a better place for miners to invest than Australia.
Well, now that outrageous attack on Zambia is having some consequences. Eventually, the Zambian government, which initially tried to suppress the revelations about how it had been ripped off, decided to stand up to the mining industry and withheld hundreds of millions of dollars in tax refunds due to Glencore, as well as looking to crack down on transfer pricing. In retaliation, mining companies are now engaged in a capital strike in a punitive effort to force the Zambian government to return to its supine ways. Glencore last week announced it was suspending further investment in copper mines in the country.
According to the World Bank, over 60% of Zambians live below the poverty line, and life expectancy is just 57 years. No such problems in Zug, of course: life expectancy there is a full 26 years, or 45%, higher.