Brazilian mining giant Vale SA, has been charged with $5.6 billion in unpaid taxes in Brazil. The world’s largest iron ore producing company plans to lodge an appeal against the decision.
Vale has been fighting tax claims from the government as its exports grew and mineral prices went up. In April last year it was assumed that the tax liabilities would be around 34.6 billion reais. The shares in the company dropped 0.8% after the tax due was made public.
As per Leonardo Brito, an equity analyst at hedge fund Teorica Investimentos in Rio, the current cash generation would not make the tax such a big problem for Vale. He did add that it would still take time before a final ruling as the company would appeal the decision.
National Mineral Production Department is seeking taxes from Vale on profits from foreign operations from the year 1994 to 2008. In addition the government wants the company to pay royalties from its mining operations in Brazil.
Vale is challenging the application of the regulation that requires the payment of tax in the country on net income that is generated by foreign subsidiaries as it says that this disregards the double taxation treaties. Thanks to all the uncertainty regarding the taxes the stock of the company has dropped by 21% in the last year.