Beef firm at centre of Brazilian corruption scandal channelled $1.7bn through tax havens

Wednesday, August 29th, 2018

The biggest companies involved in trading commodities driving deforestation in Brazil are channelling money through tax havens, inflating their profits and preventing greater scrutiny of their operations, according to a paper in Nature.

The paper used official figures from the Central Bank of Brazil to trace flows of money from nine major commodities traders, many of which have been implicated in and fined for their connections to illegal deforestation. It was found that US$26.9 billion of foreign capital was transferred to the selected nine key companies between October 2000 and August 2011.

The companies included JBS, which has played a central role in the biggest corruption scandal in Brazil. Former members of JBS’ management and board of directors have admitted to bribing more than 1,800 politicians from 28 different political parties in Brazil.

The former CEO and chairman of JBS also came under investigation shortly after agreeing a plea bargain with Brazilian authorities, for insider trading and suspicious transactions after news of the agreement leaked. JBS received loans of US$1.7bn from its own subsidiaries based in the Cayman Islands, a tax haven, in the period studied.

The paper notes that secrecy jurisdictions, or tax havens, allow companies to “make use of low-tax regimes, for example by shifting profits to subsidiaries registered within low or even zero percent corporate taxes”.

“Another common strategy is denoted ‘debt loading’,” the authors write, “whereby companies finance their activities in high-tax jurisdictions with loans from their own subsidiaries located in a tax haven. This strategy allows companies to minimise their taxes and sometimes receive a tax deduction in the high-tax country.”

Other companies the paper found had extensively used tax havens included the major agricultural traders Cargill and Bunge. The firms were among five traders and dozens of firms collectively fined US$29m by Brazilian authorities in May for their role in incentivising illegal deforestation for grain in the Brazilian Cerrado.

 

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The full study, ”Tax havens and global environmental degradation,” can be bought at this link: https://www.nature.com/articles/s41559-018-0497-3

The companies that are the subject of the study are named in the appendices, accessible at this link: https://static-content.springer.com/esm/art%3A10.1038%2Fs41559-018-0497-3/MediaObjects/41559_2018_497_MOESM1_ESM.pdf