KPMG brochure on commodity trading mostly about tax

Some background googling on an excellent new paper by Alex Cobham, Petr Jansky and Alex Prats about Switzerland and commodity trade mispricing led to this recent KPMG publication.

Called “Commodity trading companies: Centralizing trade as a critical success factor” it explains why “The benefits of centralized commodity trading operations are clear”.

On closer inspection, the benefits mentioned in the text appear to be mostly about tax. For example, right after page 2 mentions that “Tax costs are just one of a host of factors that companies need to consider” the next section is called “What income tax issues can arise?” followed by “What indirect tax issues can arise?”

A couple of sample quotes:

– “…wherever they are located, international trading companies face a world of risks. Given their complex supply chains and the scope of their activities, commodity trading companies must manage their way through an intricate web of cross-border income tax, value added tax (VAT) and customs issues. They also must be ready to defend their transactions and structures against growing aggression and heightened scrutiny on the part of some tax authorities.”

– “Be prepared to engage in tax disputes with local authorities, and develop your strategy for driving audits and disputes in advance.”

In fact, the word tax appears 178 times over 24 pages:

Word count for selected terms, KPMG publication on commodities trading wordcount

Source: Ctrl-F function applied to publication available here

The eight named contributors to the brochure all work for various tax departments, and the contact person works for a department called the Global Energy and Natural Resources Tax Practice.

The Cobham-Jansky-Prats paper, by the way, finds that the lack of transparency in commodity trading in Switzerland – the world’s leading trading hub for commodities –  “creates a serious risk of illicit capital movement” with developing countries possibly losing billions to mispricing.




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