Cargill, the largest grain trader in the world, is still avoiding tax in Europe despite new international legislation. The American company does this via letterbox companies in the Netherlands and Luxembourg. In this way, Cargill saved an estimated tens of millions of euros between 2019 and 2021.
This is evident from annual reports that Cargill has filed with the Dutch and Luxembourg Chambers of Commerce. The money Cargill saved with the evasion would otherwise have benefited the treasury of either the United States of America, or the many other countries where the multinational has subsidiaries.
The grain trader is active in more than sixty countries and earns money from the purchase and sale of grain and raw materials. In doing so, it benefits from high grain prices, such as during the war in Ukraine. Partly because of this, turnover shot up to a record $165 billion last year.
Strict anti-abuse rules
That Cargill still manages to avoid taxes is remarkable. Since 2020, strict European anti-abuse rules have been in force. These ‘ATAD2’ rules should make proven ways of tax avoidance impossible. This also brought an end to one of the most famous evasion routes via the Netherlands, the so-called CV/BV structure, which Cargill also used until 2019.
The CV/BV structure allowed American companies to channel their foreign profits through a Dutch BV to an associated Limited Company (CV), where the profits were then not taxed.
Cargill lifted its resume in February of 2019. From that moment on, foreign profits from the Dutch BV went to a Luxembourg letterbox company, Cargill International Luxembourg 25 (CIL25). The hundreds of millions of euros in profits that have been received by this firm since 2019 are subsequently not subject to tax, according to CIL25’s annual reports.
It is not known why the Luxembourg tax authorities did not levy any income tax between 2019 and 2021. Cargill declined to answer specific questions regarding this. Experts from various universities have requested Fidelity monitored, but might not find an explanation for this with the available information from the annual reports.
“Very mysterious”, say Leiden professor of tax law Jan van de Streek and his PhD student Josephine van der Have, for example. Luxembourg professor Werner Haslehner says he should see the so-called ruling ‘to understand why no tax is paid here’. However, such rulings, tax agreements between the tax authorities and a company, are always strictly confidential.
Vincent Kiezebrink, researcher at Stichting Onderzoek Multinational Ondernemingen (Somo), suspects that this is a new avoidance structure that is not yet entirely clear to outsiders. “Researchers are always years behind practice,” says Kiezebrink. “If new laws are introduced that make an old route impossible, tax advisors often just come up with something new. But it always takes a while for the rest of the world to realize that.”
Mind blow
“It is astonishing to read that Cargill can mysteriously get the tax to zero for everyone,” responds MEP Paul Tang (PvdA). Tang is chairman of the subcommittee that drafts European tax laws and says he will ask questions to the European Commission regarding Cargill. “This should not go unnoticed, further investigation is required.”
The European Parliament has just passed a new law that might, in some cases, remove tax benefits from letterbox companies in Europe. This ‘Unshell directive’ (‘unletterbox law’) is now before the European Council of Member States for the final decision. “The piece regarding Cargill makes it clear once more what’s at stake in that decision,” says Tang.
Cargill is through two months ago, a week ago, and last Friday Fidelity asked for answers to specific questions regarding the tax structure, but the company declined to comment. A spokesperson does indicate that Cargill adheres to ‘the highest standard of tax reporting’. Furthermore, the company says it adheres to both the letter and the spirit of tax laws around the world, and would pay taxes in all countries where profits are made.
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