Rotten to the Glencore

I recently discovered that Glencore the multinational commodities trader “based” in Switzerland is deliberately paying money from its UK company to its headquarters in, you’ve guessed it, the shady tax haven of Switzerland.

I have looked at Glencore’s accounts and being a tax expert I know these sort of things when I see them. It is clearly a case of avoidance.

I won’t bore you with the details but it involves the UK company pretending that they need insurance. Normally, this wouldn’t cost much, especially not for a mining company, but they conveniently find an excellent deal with their parent company in Switzerland.

Now, you can be certain that if they’ve looked at MoneySupermarket they’ve conveniently found that the policies don’t cover something “important” like accidents involving “non-employees” (who are probably employees anyway).

Anyway, their parent company charges them a premium and they pay it without any fuss.

Now here comes the complex part so if you don’t understand don’t blame yourself for not being a tax expert.

This complex arrangement is subject to what we tax experts call “transfer pricing adjustments”. This means that for tax purposes they pretend that they pay what they would pay to a third party insurer.

At this point Glencore pretends that what they paid is reasonable and produce significant amounts of “evidence” to support their claim. They even employ a person to do just this called a “transfer pricing specialist”.

What’s really bad is that they have to stick to this basis so they can’t chop and change their methodology to produce a fair result for each and every transaction.

There is an exception to this for derivative contracts under CTA 2009, s 600. This requires that “fair value accounting” is used. And as we know from transfer pricing, you can make many things look fair which aren’t.

So you can see its all just a ruse.

A ruse, I might add, which does not withstand the scrutiny of a tax expert such as myself.

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