People in Australia are furious about an expose in the Sydney Morning Herald that reveals that Glencore Xtrata, which is a mammoth global mining company operating coal mines in Australia, paid virtually no tax over the past 3 years.
The source of the story was a former multinational executive who is concerned at the rampant levels of tax evasion and tax avoidance by multinationals operating in Australia. It’s worth a read and explains the complicated lengths the company has gone to in avoiding taxes. Part of it is taking out loans at unusually high interest rates from its own overseas holding companies another part is selling coal to itself and reaping the profits in tax havens.
This isn’t the first time the finger has been pointed at Glencore Xtrata. The merger of Glencore and Xtrata was fishy from the start and the company is quickly becoming the global poster child for shady tax and commodity dealings. Officials in Italy and the UK have/are investigating the company.
The genius of it all is impressive and a bit repulsive. As I trader, I only care about what’s going to happen next.The risk is that companies quickly become so blatant that the public demands action or that some broke government that hasn’t been bought off by lobbyists takes an interest.
But I doubt it. Accounting is complicated stuff and most of the public really only cares about what Kim and Kanye are doing so stories like this are easily forgetten. In that case, other executives will figure out what Glencore Xtrata is doing and they will exploit the same loopholes. At some point it will be some rampant that something will have to be done… but stock prices could soar in the meantime. I’d guess that’s a 90% likelihood.
