Brazilian meat multinational JBS avoided up to an estimated $442 million in taxes between 2019 and 2022 by exploiting Luxembourg-based mailbox companies, according to research published today, April 28, by SOMO.
SOMO, also known as the Centre for Research on Multinational Corporations, is a not-for-profit entity which investigates international companies.
JBS, which recorded revenues of $73 billion in 2023, has 375 subsidiary companies in 37 countries.
According to SOMO’s investigation, JBS had 17 holding companies in Luxembourg as of 2022. Through these businesses, it owned 23 subsidiaries across the US, Canada, Australia and Europe with a combined value of $58 billion.
However, these Luxembourgian holding companies were merely shell, or ‘mailbox’, companies, SOMO said. In 2022, only one of the 17 businesses had any employees (five in total), and there was no evidence of any economic activity, outside of holding and financing, in any of them.
Between 2019 and 2022, only six of the 23 subsidiaries paid any corporate income tax, while four of them received corporate tax credits. This resulted in a net $500,000 in corporate tax paid in Luxembourg.
During the same period, JBS’s Luxembourg-based subsidiaries recorded $3 billion in pre-tax profits, meaning their effective tax rate was 0.02%.
The new research builds on previous probes into JBS’s tax avoidance, SOMO said. In September 2022, a joint investigation by the Guardian newspaper and Lighthouse Reports led to allegations that JBS had taken advantage of inter-company loans to engage in “aggressive tax avoidance”.
For the 2019 to 2022 period, SOMO’s researchers estimate that JBS avoided approximately $293 million in corporate income taxes by following this same inter-company loan method.
The meat multinational also restructured its dividend payment flows to avoid paying withholding taxes to the tune of at least $148 million over the same timeframe, according to SOMO.
SOMO’s allegations follow news of JBS receiving approval, on Tuesday, April 22, from US authorities to list on the New York Stock Exchange (NYSE).
Despite the approval, JBS has not disclosed its tax practices to its investors, SOMO said.
“JBS is exploiting the global financial system with surgical precision, using complex offshore structures to dodge taxes,” said SOMO’s senior researcher, Vincent Kiezebrink.
“Allowing JBS access to US capital markets will only strengthen the monopolistic position it’s acquired there. It’s unacceptable that the Securities and Exchange Commission has approved JBS’s application for an NYSE listing.”
JBS’s shareholders are due to vote on its US listing on May 23.
“Now it's up to JBS's shareholders to consider the material risks in relation to its tax avoidance practices and vote against this proposal,” Kiezebrink said.
JBS responded to SOMO’s claims by saying that it works to ensure compliance with all tax laws where it operates, and approaches tax authorities with openness and transparency.
The company also said that SOMO’s research contains multiple factual errors and “misleading insinuations,” but failed to elaborate.
ITR has approached JBS for comment.
