Argentina accuses world's largest grain traders of huge tax evasion

Grain traders ADM, Bunge, Cargill and Dreyfus deny charges by Argentine government of substantial tax evasion

Felicity Lawrence
guardian.co.uk
Wednesday 1 June 2011

Photograph: Bloomberg/Getty

The world's four largest grain traders, responsible for the vast majority of global corn, soya and wheat trading and processing, have been accused of large-scale tax evasion in a landmark series of cases being brought against them by the Argentinian government.

In an interview with the Guardian, Ricardo Echegaray, the head of Afip, the Argentine revenue and customs, has given a detailed account of the charges his department is bringing against ADM, Bunge, Cargill and Dreyfus.

"These companies have gone into criminality," Echegaray said. "2008 was when agricultural commodities prices spiked and was the best year for them in prices, yet we could see that the companies with the biggest sales showed very little profit in this country."

The Guardian has learned from separate sources that Afip is seeking to claim $476m (£290m) for what is says are unpaid tax and duties from Bunge, $252m from Cargill, and $140m from Dreyfus. The companies have all denied all the allegations and have said they will defend themselves vigorously.

With the global food system and who controls it under intense scrutiny in recent weeks, thanks to record prices, the legal battle between Afip and the big "ABCD four", as they are known, has taken on heightened significance.

Oxfam, in a report earlier this week, warned of spiralling prices and a huge increase in global hunger over the next two decades, and said that corporate concentration in the global food trade was a structural flaw in the system.

Echegaray said he had begun investigating Argentina's large business taxpayers towards the end of 2008, cross-checking information given to his authorities with information from other countries where their exports were destined, by making use of tax information exchange treaties – some of which have been newly signed. He also cross-checked declarations made to Argentinian customs with corporate income tax returns.

He said he had evidence from that detailed investigation that all four traders had submitted false declarations of sales and routed profits through tax havens or their headquarters, in contravention of Argentinian tax law.

He also alleged they had on occasion used phantom companies to buy grain. He further alleged that they had inflated costs in Argentina to reduce taxable profits or claim tax credits there.

The Afip inquiry has focused on the traders' sales to Uruguay, among other low-tax jurisdictions.

Echegaray said Bunge had set up an office in the tax-free zone of Montevideo through which it began routing its exports after 2007, from which point it declared no gains in Argentina. He alleged his checks had revealed that Bunge employed only a handful of people in Uruguay's capital, and that it had no real imports or exports from that office other than small items for those few staff. Bunge was expelled from the Argentine exporters' register last week.

Bunge denied the allegations absolutely and was adamant it had broken no laws or tax rules. "We believe that we have done nothing wrong and that our past tax payments are complete. This is an issue that is not unique to Bunge, or even our industry. We will continue to take the appropriate legal steps to defend ourselves," it said in a statement.

Echegaray alleged that Cargill had also used Uruguay and Switzerland subsidiaries to evade taxes in Argentina. Cargill, ADM and Dreyfus were all suspended from the exporters' register by the government earlier this year as a result of the investigation.

Cargill said: "All the allegations made about Cargill are false. Cargill complies with all Argentine tax and customs regulations. We are vigorously defending various tax and customs audits and litigation."

ADM responded that it "conducts business in accordance with the laws, including those governing tax obligations, in the countries where we operate. We are co-operating with Afip to successfully resolve this situation."

Dreyfus declined to comment, but according to Ciara, the grain exporters' trade association in Argentina, it too denies all the charges. Ciara's president, Alberto Rodriguez, commented that the government's charges of tax evasion against all four traders was political posturing.