Two massive aluminium companies, Alcoa and Norðurál (owned by Century Aluminum), pay little or no income tax in Iceland, RÚV reports. Instead, the multinational corporations funnel funds abroad, thanks in part to Icelandic laws that facilitate the lowering or elimination of local taxation.
The avoidance of these two aluminium giants is made possible by complicated chains of ownership. All financial dealings of Alcoa are routed through affiliates in Luxembourg, while the finances of Norðurál are processed via its parent company in Delaware, in the U.S. The operations in Iceland are apparently run on a loan from the parent companies abroad, so the Iceland-based companies are permitted to deduct the loan repayments they make to their own parent companies annually before determining they local annual income. This brings the taxable income of Alcoa and Norðurál to next to nothing.
A feature on the two smelters on Kastljós earlier this week revealed that Alcoa, which has been operating in Iceland for 16 years, has not paid taxes at what would be the appropriate rate since 2003 and have a tax credit to look forward to next year.
The IMF has advised Iceland that the tax laws currently being exploited by Alcoa and Norðurál need to change.
With the activities of Alcoa and Norðurál (as well as the power systems that support the energy-demanding smelting they undertake) impacting Icelandic nature to such a large degree, one might ask what is the benefit of having these companies operating in Iceland if there isn’t even a financial payoff.