Glencore tax bill set to double on London IPO « Mining Blog

Glencore tax bill set to double on London IPO

2. May 2011,

According to the London Financial Times (27 April 2011) Glencore is facing a big increase in its tax bill following its $60bn initial public offering IPO) which is expected towards the end of May. The world’s biggest commodities trader has paid almost no corporate taxes on its trading business for years, in spite of bumper profits, according to the banks underwriting its $60bn listing.

The banks doing the pre-IPO research include Citigroup, Credit Suisse and Morgan Stanley. According to Liam Fitzpatrick, lead analyst for Credit Suisse:
“Under the current private structure, [the trading business of] Glencore has been largely tax free.”

Michael Rawlinson, lead analyst for Liberum Capital, another member of the IPO syndicate, says: “Income has been subject to a corporate tax rate close to zero due to the company’s historical share ownership structure.”

The banks estimate that Glencore’s trading business made earnings before taxes and interest of $2.33bn last year, though the company has not disclosed its net income from its massive trading business.

Glencore pays corporate tax rates of between 20 and 30 per cent for its industrial activities, which include mines, oilfields and farming.

The planned London Stock Exchange flotation (valued at around US$12 billion) is predicted to force Glencore to abandon its trading business tax-free status. UBS, another of the consortium banks behind the huge (third largest ever in the European Union) predicts that the company would see its overall tax rate jump to more than 20 per cent this year, up from 10 per cent in 2010.

Once again – Glencore has “declined to ­comment”.

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