Vale SA (VALE5) investors stand to benefit as a decade-long court battle over $15 billion in back taxes that’s been weighing on the miner’s stock nears an end.
The Supreme Court is set to rule by June on a similar case brought by Coamo Agroindustrial Cooperativa, a farming group from the southern state of Parana that’s suing tax authorities to avoid levies on profits from foreign units. A ruling in favor of the group would be in line with the legislation of most other countries, according to Peixoto & Cury Advogados, a legal firm that specializes in corporate law, including tax issues.
The case is being watched as a benchmark for Brazil’s biggest exporters — from Vale to beermaker Cia. de Bebidas das Americas to steelmaker Gerdau SA (GGBR4) — who are fighting a combined $44 billion in tax claims. A win would be a boon for Vale because investors have already priced in much of the tax losses, said Empiricus Research’s Roberto Altenhofen.
“The market is overreacting a bit about the chances of Vale having to pay all the taxes that are being claimed,” the analyst at the Sao Paulo-based consulting firm said in a phone interview. “It’s almost impossible to predict the outcome of this trial, but what we can say is that Vale seems to be willing to negotiate with tax authorities so a deal can be reached. Vale may end up paying something, but not the full amount.”
