Glencore paid $5 billion to foreign governments

Raw materials extractors are being forced to open up their books to a greater degree swissinfo.ch

Commodities giant Glencore shelled out $5 billion (CHF4.9 billion) in taxes, royalties and other payments to countries where it extracted raw materials last year, the Baar-based company revealed on Wednesday. 

Glencore was forced to reveal the figures by a new European Union law that addresses allegations of tax dodging by the commodities industry and of corruption within the countries that the raw materials are mined. All of Glencore’s figures are characterized as above-board payments in line with international standards.

Swiss pressure group Public Eye greeted the publication of Glencore’s figures as a “first step in the right direction”. But it pointed out they would only help curb local corruption in developing economies if citizens use them to hold their governments to account.

Prevalence of export and import duties

The abundance of commodities in African, Latin American and Asian countries is often referred to as a “resource curse”. Campaigners believe that such countries are ripped off by unscrupulous Western extractors and by their own government officials, who pocket oil, gas and minerals revenues rather than distribute them to the population.

According to Glencore’s figures, the biggest pay-out of $867 million went to Australia, followed by $525 million to Argentina and $493 million to the Democratic Republic of Congo. 

The majority of payments (just over $1 billion) went to export and import duties in various countries, followed by royalties on revenues ($803 million), taxes ($496 million) and ‘production entitlement’ ($332 million) – cash payments based on volumes of commodities extracted.

“The tax and royalty payments we make in connection with our activities can be used to provide the citizens of those countries with government services and infrastructure to improve their quality of life,” the company’s chief financial officer, Steve Kalmin, says in the report.

Last year, he added, Glencore’s total economic contribution amounted to $25.2 billion in taxes, royalties, employees’ wages and benefits, and payments to local suppliers. “We are committed to the highest standards of corporate governance and transparency,” he wrote.

Glencore, which made an $5 billion loss during difficult trading conditions last year, is one of a number of extractors that have released details of government payments. Shell said it stumped up $60.8 billion in 2015 and BP paid out $15 billion.

Last year, trading house Trafigura broke ranks to become the first Swiss commodities firm to declare payments to foreign governments, but its figures are not so up-to-date. It paid $4.3 billion in taxes, royalties and other payments in 2013.

Remaining questions

Public Eye’s Marc Guéniat said the transparency required by the EU legislation does not answer other allegations of malpractice. Some firms are accused of transfer pricing, charging mines exorbitant fees for back office services which are then deducted from taxes due to the producing countries. Others are believed to pay below the odds for minerals and then charge full prices on the open market.

The law also fails to shine a light on the “dark corner” of commodities trading in which Switzerland holds a prominent position. One third of all the crude oil shipped around the world is traded through Swiss firms. Switzerland is also the world’s number one trader of grains and top of class in Europe for sugar and cotton.

“Switzerland could make an important contribution as a global leader of commodity trading by introducing a law that forces transparency on the purchases of traders to governments,” he told swissinfo.ch.

But there appears to be little chance of that in the short-term. The Swiss parliament is due to debate a law similar to that of the EU, but the draft bill specifically excludes commodities traders, which make up the vast majority of commodities companies in Switzerland.