The Rising Influence of Rising Affluence

[DewDiligence]

VALE settles federal tax dispute for $9.6B, ¾ deferred:

http://finance.yahoo.com/news/vale-pay-9-6-billion-013915919.html

Brazilian miner Vale SA said on Wednesday that it agreed to pay 22.325 billion reais ($9.61 billion) in taxes on profit from overseas operations, accepting an offer from Brazil's government that cuts a disputed back-tax bill in half.

The world's largest producer of iron ore will spread payments over 15 years with 5.965 billion reais [$2.6B], or 27 percent of the total, due this month. The agreement came as Vale neared a deadline of Friday to either accept the government's discount offer or see it vanish.

The remaining 16.36 billion reais [$7.0B] will be made in 179 monthly payments [i.e. about $40M per month]... Without the discount, Vale estimated its disputed tax bill at 45 billion reais ($19.4 billion).

While Vale agreed to end lawsuits contesting the payments for the 2003-2012 period in exchange for the discount, Chief Executive Officer Murilo Ferreira said the company still considers the Brazilian assessment unfair "double taxation".

… the cash impact on Vale's 2013 profit will be 20.7 billion reais, the company said. Future payments will be adjusted for inflation using Brazil's benchmark Selic rate…

The tax payments will be made out of the company's cash flow and will not affect the payment of dividends under the company's current dividend program, Ferreira said.

The monthly payments will be adjusted for inflation according to the Selic rate (#msg-94513417).