LONDON Tax authorities are reviewing raw material transactions between Glencore Xstrata Plc and its wholly owned Portovesme smelter on the Italian island of Sardinia, the Baar, Switzerland-based company said.
The confirmation came after Italys Guardia di Finanza alleged that it had uncovered a tax evasion scheme totaling more than 120 million ($159.5 million) at an unnamed lead and zinc producer on the island.
"Glencore can confirm that the Italian tax authorities are reviewing some inter-company transactions between Portovesme and Glencore," a company spokesman said in an e-mail. "All transactions were conducted in accordance with applicable Italian tax laws and on an arms length basis between Portovesme and the Glencore Group. Portovesme continues to engage with the tax authorities to ensure a swift conclusion to the review."
The tax authorities investigation relates to transfer pricing for raw materials sold to the zinc and lead producer by its parent company, which Italian police said had been transacted at an "excessively onerous price."
The parent company obtained above-benchmark prices for raw materials it sold to the lead and zinc smelter, contributing to the "heavy losses" it reported to domestic tax authorities, the Guardia di Finanza said.
A version of this article was first published by AMM sister publication Metal Bulletin.