Vale Says Accord on $13 Bln Claim Would Require New Law

Vale SA (VALE5), the mining company fighting more than $13 billion in back-tax claims over profits from foreign units, expects Brazil to alter legislation to avoid future charges before settling the dispute.

The government’s proposal to scrap fines, interest and legal charges on companies agreeing to settle the levies on overseas profits is ‘not enough,’ Vale General Counsel Clovis Torres said in an interview in Belo Horizonte today. Vale believes it doesn’t owe anything and has merits to win the case in court, he said, adding the “numbers” are being assessed and a final decision on whether to settle will come from shareholders.

“What they are offering is not enough for us to take part in this,” Torres said. “They need to come up with a new law that is consistent and better than the one in place.”

Brazil’s biggest exporters including Vale, beermaker Cia. de Bebidas das Americas and steelmaker Gerdau SA (GGBR4) are fighting a total of 86 billion reais ($38 billion) in tax claims over foreign units’ profits, the Finance Ministry said in March. Congress this month approved a bill scrapping fines, interest and legal costs if companies pay outstanding claims in one tranche and offering a 50 percent reduction for those opting to pay in installments.

Vale rose 1.1 percent to 32.61 reais at the close in Sao Paulo today, extending its rally in the past three months to 19 percent.

Additional Claims

The country is asking Vale, the world’s third-largest mining company, to pay 30.5 billion reais in taxes for overseas profits between 1996 and 2008, the company said April 2 in a U.S. regulatory filing. Vale expects Brazil to file additional tax claims for the years after 2008.

“They need to come up with a better outlook for the future, not the same that we’ve been questioning in the past,” Torres said. “You continue to accrue debt in a way we think isn’t correct. Giving up everything and continuing to be taxed in a way we consider incorrect is not going to happen.”

The company is discussing a possible settlement with shareholders and no decision has been made yet, Torres said, adding that the advantage of a settlement would be to “trade an uncertainty for a certainty.”

Vale’s potential liability may amount to as much as 45 billion reais if penalties and tax claims the government hasn’t filed yet for profits after 2008 are included, Torres said.

The company has been fighting the claims for more than a decade. The dispute may be extended after Brazil’s Supreme Court decided in April to reassess a similar case used as a precedent.

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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