May 10, 2012 / 12:57 AM / 6 years ago

Vale wins injunction barring Brazil tax debt payment

SAO PAULO (Reuters) - Brazil’s highest court suspended on Wednesday the payment of about 24 billion reais ($12.4 billion) in back taxes by mining company Vale VALE5.SA, handing the world’s largest iron ore producer a temporary victory in a dispute with the government.

Justice Marco Aurélio de Mello at the Federal Supreme Court said a claim by the Finance Ministry’s legal adviser to demand an immediate payment by Vale was not possible until the court, known as STF, discussed it in a plenary session, according to a ruling distributed by email.

Vale is fighting four actions by the Brazilian Federal Revenue Service, which claims the mining firm has avoided paying levies on profits obtained at some of its foreign subsidiaries. The Rio de Janeiro-based company says it has already paid this money to foreign governments and taxing the company again is an unfair burden.

“I submit this to a plenary vote so, jointly, the court decides whether the claims go against the country’s Constitution,” Mello said in his ruling.

Shares of the company, which have fallen 2 percent over the past 12 months, have suffered in the wake of the dispute, one of the nation’s biggest against a single company. The dispute underscores the political and regulatory risks that companies the size of Vale face around the world as governments seek to take greater control of national resources.

Vale has in recent years been the subject of government pressure to invest more in projects that create jobs but are detrimental to profits. The government’s tax claims, which date back from the early 2000s, amount to more than half Vale’s $22.9 billion profit in 2011 and nearly all of its 2010 profit.

The tax dispute could also mark a setback for Vale’s overseas growth strategy. For years, Vale sought to become the world’s top diversified miner by boosting revenue from sales of metals and minerals other than iron ore.

If the decision holds up in the courts, it could open the door for cases against other Brazilian-based companies that have tax liabilities on foreign earnings.

A spokeswoman for Vale in Rio de Janeiro said the company would not comment on the STF decision.

($1 = 1.93 Brazilian reais)

Reporting by Guillermo Parra-Bernal and Eduardo Simões; Editing by Peter Cooney and Ed Davies

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