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Glencore in the crosshairs of the OECD

“We are transparent,” “adhere to high international standards,” “help in developing countries to improve the lives of those living there.” On two sides, Ivan Glasenberg was allowed to spread his own praise in the NZZ about the mining company Glencore, which he managed. But the interview was hardly posted online on Thursday, the company’s feel-good moment was disturbed. But Störenfried was not a non-governmental organization. It is precisely the ideologically unsuspecting OECD, which brings together the rich nations of the world, that brought the image of a properly tax-paying corporation drawn by Glasenberg into the twilight.

The headline “Groundbreaking victory at the Supreme Court in Zambia” on the website “OECD development matters” did not yet point the suspicion at Glencore. But the text below it quickly becomes clear. Glencore or its Sambia-based subsidiary Mopani Copper Mining lost to the Court. It was fined a tax rebate of Kwacha 240 million (USD 13 million).

Prices manipulated at the expense of tax levies

The offence lies in the pricing of copper, which the Samban subsidiary sold to its shareholder company Glencore in Switzerland, according to the OECD text. It had sold copper to Glencore at a “significantly lower price” than similar sales to other customers. This enabled an intra-group profit shift away from Zambia. Mopani Copper’s revenues were lower than those for sales at market prices. Less revenue in Zambia also means less tax payments to the Zambian state.

For the OECD and its special department of tax policy and administration, the Mopani Copper Mining – Glencore case is a model case for the debate on tax avoidance practices by international corporations. They would systematically exploit the differences between the tax systems of different countries. As a result, between 100 and 240 billion dollars of tax revenue was lost worldwide each year. This corresponds to between four and ten percent of the taxes paid by the internationally operating groups.

We no longer want to accept that. The Bias Supreme Court’s ruling against Glencore is therefore seen as a “groundbreaking victory.” “It’s sending a message beyond Zambia,” says the OECD, which is cooperating with the African Tax Administration Forum and other international forums in the fight against tax avoidance. The now-published Glencore case study is just the beginning. Further case studies on practices in other countries will follow soon. They are intended to show that they want to be serious about the illegal shifts in profits and tax avoidance practices of internationally nested corporations.

For the beginning, the experts of the OECD Tax Policy Centre and the African Tax Forum seemed to be particularly suited to the case “Glencore International AG located in Switzerland”. The image polish of the Glencore boss in the NZZ does not seem to catch on with the organisations for an internationally fair tax policy. In an eight-page, attractively designed brochure, they set out what they dislike and what should be done about it.