Abattoirs using tax loopholes
ANGLO Beef Processors UK and Pilgrim’s Pride Corporation (owned by Brazilian beef giant JBS) are avoiding paying millions of pounds in tax by structuring their companies and loans in a way that allows them to take advantage of different tax systems in different jurisdictions.
These practices have been described as ‘aggressive tax avoidance’ by one tax expert – but a spokesperson for ABP told The Guardian newspaper: “We have been and remain tax compliant in all jurisdictions in which we operate.”
Investigations by the Follow the Money (FTM) Website and The Guardian state that ABP is using Dutch and Luxembourg tax rules.
The Irish-based abattoir firm set up an investment vehicle, Trojaan Investering, in Amsterdam-Zuidoost, in 2002. Trojaan then lent money back to ABP’s UK entity at a notional interest rate of 4% above Euribor, the base rate for loans between European banks. Under the Dutch tax regime, Trojaan could deduct the interest due from its corporation tax bill.
FTM highlighted that the company’s accounts showed no actual interest was paid, enabling it to cut its tax liabilities by a huge margin.
Rules in the Netherlands and Luxembourg are devised to stimulate inward investment by allowing companies to deduct the cost of cross-border lending from their corporation tax liabilities, regardless of whether the money is taxed in the jurisdiction where the loan is taken out. Follow The Money said Trojaan Investering held around €420m in assets in 2020 but had no employees, according to company records.
FTMs investigation shows the company is formally owned by Luxembourgbased Kilbroney Investments, which owns around €800m in assets and is linked to a Jersey-based investment firm, Williamstown, whose directors include Larry Goodman, the owner of ABP Food Group.
Further investigations by FTM show in 2017 Trojaan declared profits of around €1m while paying out €25m in dividends, after it received interest on loans from companies belonging to ABP Food Group of €24m. Its total tax bill that year was just €263,000, while the year before it paid €36,000 while receiving the same amount.
“We come across this structure more and more these days,”said the coordinator of the Dutch branch of the Tax Justice Network, Arnold Merkies. “According to the Dutch government the fiscal rules are intended to determine where profits should be taxed.
“In practice these rules mean companies aren’t taxed anywhere. In the Netherlands it’s deductible income, but in the other country there is no tax liability.”
Investigative website Lighthouse Reports have estimated that around €180m (£160m) of tax has been avoided by ABP and Pilgrim’s Pride Corporation by routing capital through the Netherlands and Luxembourg. Reuven Avi-Yonah, a professor of law at the University of Michigan Law School and former consultant to the Organisation for Economic Co-operation and Development, told The Guardian newspaper there was ‘no question that this is aggressive tax avoidance’
“These companies get financed by 0% loans and they pay very little tax because they’re holding companies and Luxembourg and the Netherlands apply special taxing rules to holding companies in order to attract business,” he said.
Alex Cobham, CEO of the Tax Justice Network, suggested: “This gives all the appearance of tax avoidance, designed to prevent the declaration and taxation of profits in the location of the underlying real activity – ie, the place where the profits actually arise. What I may consider abusive is not necessarily unlawful, however, such are the failings of the international tax rules.”
A spokesperson for JBS USA and Pilgrim’s said: “Pilgrim’s and its subsidiaries work to ensure compliance with all tax laws and regulations of the countries in which the companies operate, as well as openness and transparency in the approach to dealing with tax authorities.
“In the UK, it had invested approximately £2bn since 2017 in acquisitions and capital expenditures, and focused on continued investment.”