A Swiss village has decided to reject tax money from the firm Glencore and to instead donate it to charities. Other towns may follow, sending a strong signal to the government to follow the U.S. and the EU and introduce transparency rules for the extractive industry.<\/p>\n
It\u2019s rush hour in the city of Zug in Central Switzerland as Mrs Sandra R\u00e4ppli struggles to raise her voice over the traffic noise. About 35 people listen as she lectures about commodity extraction and trading companies based in the city and the neighbouring town of Baar.<\/p>\n
R\u00e4ppli talks about complex company structures and tax optimisation, finally asking the audience: \u201cCould you follow my explanations? Did you understand?\u201d Then she smiles: \u201cYou couldn\u2019t? No problem, because that is what those companies intend.\u201d<\/p>\n
Once a month, actress Maria Greco slips into the role of Sandra R\u00e4ppli and guides groups of inhabitants and visitors through the streets of Zug. The canton counts 116,000 inhabitants and more than 30,000 companies, 105 of which belong to the commodity cluster formed by GlencoreXstrata, Northstream, Rusal and Gazprom, to name just a few.<\/p>\n
Privileged taxation for holding, domicile and mixed companies brought these firms here. Holding companies are exempt from cantonal income tax, and pay almost no capital tax. Incomes of management companies generated abroad are hardly taxed, too.<\/p>\n
Critics say Zug\u2019s tax environment is an invitation to \u2018transfer pricing\u2019, a method to allocate a corporation\u2019s net profit before taxation; in other words a means for tax evasion. Despite sales of 214.44 billion dollars in 2012, Glencore paid no tax on earnings at all in the canton of Zug last year.<\/p>\n
The commodity cluster as a whole is estimated to have paid only 40 million dollars in cantonal and communal taxes.<\/p>\n
Under official secrecy rules, exact taxes paid by Glencore and other companies are not available. Statistics on the number of companies or their employees is also lacking, even at the national level.<\/p>\n
\u201cThat\u00a0 lack of transparency is a major problem,\u201d says Andreas H\u00fcrlimann, a parliamentarian with the Green-Alternative party in Zug. \u201cEven as a member of parliament I can\u2019t be sure that things are handled correctly if the government on any occasion hides behind the tax secret.\u201d<\/p>\n
H\u00fcrlimann finds Zug\u2019s tax regulation deeply unfair. \u201cIt makes us rich, while people in extraction countries suffer, as the companies evade taxation there.\u201d He says that Zug bears at least some moral responsibility.<\/p>\n
At the end of her tour, Sandra R\u00e4ppli stops in front of Zug\u2019s town hall. \u201cOur politicians are hand in glove with Glencore\u2019s managers,\u201d she tells her audience. \u201cOnly if people get active can something be done about these companies.\u201d<\/p>\n