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.
It’s rush hour in the city of Zug in
Central Switzerland as Mrs Sandra Räppli 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.
Räppli talks about complex company structures and tax optimisation,
finally asking the audience: “Could you follow my explanations? Did you
understand?” Then she smiles: “You couldn’t? No problem, because that is
what those companies intend.”
Once a month, actress Maria Greco slips into the role of Sandra
Räppli 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.
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.
Critics say Zug’s tax environment is an invitation to ‘transfer
pricing’, a method to allocate a corporation’s 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.
The commodity cluster as a whole is estimated to have paid only 40 million dollars in cantonal and communal taxes.
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.
“That lack of transparency is a major problem,” says Andreas
Hürlimann, a parliamentarian with the Green-Alternative party in Zug.
“Even as a member of parliament I can’t be sure that things are handled
correctly if the government on any occasion hides behind the tax
Hürlimann finds Zug’s tax regulation deeply unfair. “It makes us
rich, while people in extraction countries suffer, as the companies
evade taxation there.” He says that Zug bears at least some moral
At the end of her tour, Sandra Räppli stops in front of Zug’s town
hall. “Our politicians are hand in glove with Glencore’s managers,” she
tells her audience. “Only if people get active can something be done
about these companies.”
Räppli has just ended her second season of city tours. She’s happy
that the attendance has remained high – by Swiss standards. Media
reports and a campaign run by the Swiss non-governmental organisation Berne Declaration have clearly increased popular interest in the commodity sector.
In the nearby canton of Zurich, these efforts have yielded fruits.
Several villages are up in arms against Glencore. The corporation’s
flotation on the stock market in 2011 had filled the pockets of CEO Ivan
Glasenberg, leading to a huge one-time tax inflow for the canton. That
money was redistributed to the communes.
But in several communes, residents were appalled by profiting
indirectly from what they call “Glencore’s dubious business conduct
abroad.” They collected signatures and demanded that at least 10 percent
of the “Glencore money” be donated to charities who support affected
communities in extraction regions.
In Hedingen, a village of 3,500, voters approved the donation of
120,000 dollars to charities. Samuel Schweizer, a member of the local
citizens’ committee, explained that success to IPS: “Our proximity to
Zug was crucial, people could relate to Glencore. Also, we’ve managed to
build a broad committee.”
Schweizer explained that donating only 10 percent of the “Glencore
money” instead of the whole amount further helped to find a majority.
At least five more communes will soon decide upon similar
initiatives. In Affoltern for example, 180,000 dollars are at stake. In
Hausen, it’s 80,000 dollars.
There, Franz Schüle of the local initiative committee is optimistic.
“We live in a rural area. When I explain that in Colombia the surface of
the land belongs to the farmers, while everything below can be owned by
extraction companies, people can relate to the problem easily.”
“Direct democracy has hit Glencore,” says Oliver Classen,
spokesperson of the Berne Declaration. He’s aware that these communal
initiatives are only a drop in the ocean and a one-time effort.
“However, Hedingen has a huge political signalling effect,” Classen
This summer, the European parliament introduced the Transparency and
Accounting Directives that force mining, oil and gas companies to
publish their payments to governments; country by country and project by
project. The Swiss government has remained hesitant so far and will
present its own measures next spring.
Oliver Classen demands transparency on payments and human rights
obligations for commodities companies producing or trading abroad.
GlencoreXstrata neither commented on the tax initiatives nor
responded to accusations ranging from tax avoidance to violating basic
human rights in extraction countries. Its spokesperson Charles Watenpuhl
sent IPS a statement.
“We believe that Glencore’s global presence and economic strength
have a predominantly positive impact on the communities in which we
operate. We seek out, undertake and contribute to activities and
programmes designed to improve quality of life for the people in these
“Glencore’s tax strategy and payments play a vital role in our
intention to achieve long-term sustainable development. We are committed
to full compliance with all statutory obligations, full disclosure to
tax authorities and reporting transparently in the tax payments that we
make to the governments of the countries in which we operate.”