GLENCORE’s head of coal assets, Peter Freyberg, has said reports in the Sydney Morning Herald “are not just wrong in relation to the income tax claims,” but “contain numerous factual errors and are misleading; for example, what we assume is a rounded up revenue figure is presented as (taxable) ‘income’.” Photo: Glencore

GLENCORE’s head of coal assets, Peter Freyberg, has said reports in the Sydney Morning Herald “are not just wrong in relation to the income tax claims,” but “contain numerous factual errors and are misleading; for example, what we assume is a rounded up revenue figure is presented as (taxable) ‘income’.” Photo: Glencore

Glencore Slams Newspaper
Tax Claims

Issue 91, July 2014

Glencore has paid “almost zero tax” on its coal operations in Australia in the past 3 years, according to recent reports published in the Sydney Morning Herald.

The claims have prompted a damning pushback by Glencore this week, which warned on Thursday that it “will be following up directly with the newspaper... in the days ahead.”

Citing an anonymous “expert in multinational financing”, “independent of Glencore and its commercial rivals”, the paper claimed Glencore has used inter-company loans at arbitrarily high rates to mitigate profits in Australia, diverting them to its parent company in Jersey and Switzerland.

Its Australian coal division has borrowed $3.4bn internally at rates as high as 9 per cent, the report charges, re-issuing the proceeds to other subsidiaries interest free. “Glencore is an extreme case,” it says, “founded as it is by US tax exile Marc Rich, controlled from a tax haven, and with a colourful history as a corporate maverick.”

An internal Glencore email sent to colleagues this week by Peter Freyberg, Glencore’s Sydney-based head of coal assets, dismissed the claims as “wrong” and “misleading”. The company has paid $400m in corporate income tax in Australia in the last 3 years and $8bn in royalties and tax in the country since 2007, Freyberg said, including royalties of $4bn and corporate income tax of $2bn.

“The reality,” he said, “is that a significant proportion of Australia’s coal mines are currently operating at a loss and although we run an efficient business, we are not immune to the market conditions.”

The battle highlights a lack of granularity in Glencore’s tax reporting, vs. peers such as Rio Tinto. Tim Scott, Glencore’s global head of tax, told a parliamentary inquiry in the UK in 2012 that country by country reporting had both pros and cons. “The cons are the cost of producing this information in a reliable and audited fashion.”

Glencore’s annual report shows a net income tax charge of $254m last year on net losses of $7.3bn and revenue of $233bn. “Due to its global reach,” it reads, “the Group is subject to enhanced complexity and uncertainty in accounting for income taxes.”

In 2012, Glencore reported a net tax gain of $76m. 

“Glencore is an extreme case.”

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