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be managed. However, transfer pricing is easily abused. Nowhere does the law allow outright 228 deception. In such cases there is a clear intent to avoid tax, which is illegal. In recent years, there has been renewed interest on the part of national governments in the 229 regulation of transfer pricing, resulting in a proliferation of court cases as multinational companies have sought to test the legality of new laws. Of course, trying to track instances of transfer pricing is difficult, for the obvious reasons that intra-company transactions are not usually transparent. Issues of transfer pricing, therefore, tend to move into the public arena only when governments move against corporations, usually through the legal system or by gaining access to a company’s records. The ABCD companies have been the object of both approaches on a number of occasions. In 2009, for example, the Indian division of Bunge was 230 ordered to pay additional taxes as a consequence of ‘a transfer pricing-related indiscretion’. The Indian tax authorities claimed that the company had doctored figures in its financial statements while preparing its transfer pricing report, which is designed to ascertain the related231 party income of a company. Bunge was also involved in a more recent case initiated by the Argentine tax authorities, who in 2011 raided the premises of a number of large corporations, including Bunge and Cargill, on suspicion of illegal transfer pricing activities. According to newspaper reports, the Argentine authorities accused all four ABCD companies of tax evasion in 2011. In May 2011, the government expelled Bunge from the export register. One report quoted Ricardo Echegaray, head of the Argentinean revenue service (Afip), as saying: ‘“Until 2007 … Bunge paid about $100m in corporate income tax in Argentina a year. Then it decided to set up an office in the tax-free zone of Uruguay’s [capital] Montevideo. From that date, it suddenly declared no gains in Argentina. We cross-checked with Uruguay and we found they had not exported anything from Montevideo and had almost no staff there.” […] Echegaray … said he had evidence that all four companies had submitted false declarations of sales and routed profits through tax havens or their headquarters in contravention of Argentinean tax law. In addition, he said, they had declared excessive costs in Argentina to reduce taxable profits there. He also accused 232 them of using phantom companies, on occasion, to buy grain’. All four companies have denied the charges, and presumably these issues will be further considered at a later stage. For now, it is not possible to confirm the reports regarding the suspension of the commodity traders. But this cannot help an already troubling situation for the ABCDs, confronted as they are by new competition from emerging traders and the creation of ‘mega-farms’. The situation for the commodity traders in the burgeoning Latin American market could be problematical, and may well be a situation from which some of the new commodity traders, including Olam, Wilmar, Sinar Mas, COFCO, and others, can benefit.
WHERE TO FROM HERE? It may be redundant to note that companies whose profits are in the billions of dollars are powerful. Nothing lasts forever, but it is hardly surprising that the big traders are well positioned to take advantage of the changes, and indeed to shape the changes as they happen. It is not just luck that has allowed a small handful of grain traders (Cargill, Bunge, and Dreyfus) to thrive and survive for well over 100 years. The economic changes outlined above, reflecting an ethos that has emphasised the privatization of public sector activities, liberalization of trade, and deregulation of finance have served the global traders well. Tariffs have come down; import quotas have been abolished, and grain reserves too; restrictions on foreign investment have been relaxed; and import dependency has increased. In each of these areas, the ABCD traders have been positioned to take advantage of the changes. In the last ten years, as this report has documented, the breakdown of regulations that had separated commercial firms from
Cereal Secrets: The world’s largest commodity traders and global trends in agriculture
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