How JBS — the World’s Largest Meat Company — Avoids Paying Taxes

JBS, the world’s largest meat company, is poised for an explosive level of growth in the coming years. The multinational meat giant, headquartered in Brazil, recently made its highly contested debut on the New York Stock Exchange. The move is anticipated to expand the company’s access to capital markets and enable its continued global expansion — but this comes at a steep cost to climate. Beef is already the largest driver of food-related emissions, and climate models suggest there is no way to stave off the worst effects of global warming without cutting back on beef consumption. Yet JBS’s newfound access to capital is all but guaranteed to enable the meat giant to keep expanding.

This sweeping expansion is also a deeply troubling development for the many advocates monitoring the company’s long history of environmental destruction, human rights abuses and animal cruelty.

JBS’s global dominance has also been fueled by another strategy: tax avoidance. As the $77.2 billion meat mega-corporation comes to control an even larger share of the global market, tax experts tell Sentient the move is unlikely to be followed by a proportional hike in JBS’s taxes, especially in the countries that account for a large percent of its sales, like the United States.

Like many multinational companies, JBS has an intricate corporate structure that enables the company to strategically avoid paying taxes by shifting money to more favorable jurisdictions, known as tax havens because of their sparse corporate tax obligations. The strategy shields JBS from paying taxes in the countries where it conducts the bulk of its business — in terms of both its sales and meat production facilities — to countries removed from its principal operations.

Environmental advocates argue that these corporate tax havens hinder climate progress, enabling JBS and many of the world’s largest polluters to avoid paying taxes that could be used to fund investment in climate solutions. 

Particularly Brazen Tax Evasion Strategies

It’s estimated that JBS avoided paying up to $442 million in taxes between 2019 and 2022, by taking advantage of a network of 17 subsidiaries in Luxembourg, according to research conducted by SOMO, the Centre for Research on Multinational Corporations. These subsidiaries operate as shell companies, without any clear principal business, beyond facilitating the flow of money from subsidiaries in other countries to JBS’s parent company.

In Luxembourg, for instance, most of JBS’s companies have no employees. SOMO found that 16 out of 17 of these Luxembourg-based companies do not employ anyone, while one company had a total of five employees. Yet this network of subsidiaries owns $58 billion of assets in the United States, Canada, Australia and Europe, according to SOMO. This nesting structure of subsidiaries enables revenue from JBS’s primary business operations (its slaughterhouses, meatpacking plants, beef and poultry farms, etc.) to be taxed in Luxembourg, a known tax haven with tax exemptions for holding companies.

“It’s very classic, brazen tax avoidance,” Vincent Kiezebrink, who specializes in corporate research at the Netherlands-based SOMO, tells Sentient. “There’s nothing there. It’s just on paper,” he says, referring to the Luxembourg subsidiaries. “They’re doing all of these things in Luxembourg that allow them to shift their profits there, while in practice — in a real economic sense — there doesn’t seem to be much there.”

While corporate tax avoidance is very widespread, baked into the business model of nearly all multinational companies, Kiezebrink has observed that JBS’s very blatant style of tax avoidance is becoming less commonly practiced — as this era of so-called “corporate social responsibility” has led more corporations to adopt, in the very least, a front of ethical governance.

“Companies do make more and more of an effort to hide what they’re up to when they’re aggressively avoiding taxes,” says Kiezebrink. Yet at least when it comes to its tax avoidance strategy, Kiezebrink says, “JBS doesn’t seem to have made much of an effort to hide.”

JBS has attempted to depict itself as a good corporate actor in other ways however, including by committing to net-zero greenhouse gas emissions, a pledge that Reuters found the company has since backtracked on and claimed was never a “promise.” JBS also boasts of its Hometown Strong initiative, which has committed $100 million so far to “the communities where we live in and work” by funding local projects across the U.S. and Canada. Yet this investment in the “hometown” communities where JBS operates is undermined by its corporate structure, which enables JBS to dodge its tax obligations in these same communities.

“When multinationals like JBS are allowed to take advantage of tax loopholes from international tax treaties and avoid paying their fair share of tax, the cost of running a country is still the same, but that burden then falls on everyday taxpayers,” says Tim Vasudeva, the head of private and public sector finance at World Animal Protection, and an author of another recent report that builds upon SOMO’s research on JBS’s tax avoidance.

According to Vasudeva, this also leads a disproportionate amount of the tax burden to fall on small businesses, which don’t have the same tax avoidance network of subsidiaries at their disposal as corporate multinationals like JBS.

The Use of Dividends and Intercompany Loans to Boost Profits

Both of the recent reports, produced by SOMO and World Animal Protection, also reveal JBS’s extensive use of intercompany dividends and loans as mechanisms to transfer pre-taxed wealth to its Luxembourg network, before moving it to the parent company, the overarching owner of JBS’s tiers of subsidiaries. The end effect of this is to lower JBS’s overall tax burden and maximize the company’s net profits.

Researchers at SOMO found that JBS’s Luxembourg-based subsidiaries received up to $22 billion in loans in 2022 from its other subsidiaries in low-tax jurisdictions, specifically Malta and Delaware. JBS paid effectively nothing in interest on these loans, facilitating a massive transfer of money to Luxembourg. According to SOMO’s report, “the weighted averages of the annual interest rates on these loans were 0.40 per cent and 0.65 per cent.”

“There is no reason to lend money to Luxembourg from Malta at zero percent interest rate and then lend it to other entities, other than tax purposes,” says Vasudeva. He calls this transfer of money the “artificial flow” of capital — volleying money back and forth for the sole purpose of taking advantage of tax codes in differing jurisdictions.

After receiving these very low-interest loans, the Luxembourg companies continue this artificial flow of money by issuing loans to JBS’s primary operations in the U.S., U.K., Ireland, Australia, Brazil and Mexico at much higher interest rates (an average of five percent). By way of pre-tax deductions from interest payments, JBS is then able to lower its tax base in the U.S. and other jurisdictions where it primarily operates. At the same time, this enables the flow of its profits to Luxembourg.

The researchers also traced JBS’s use of intercompany dividends, another mechanism enabling the flow of pre-taxed money to its Luxembourg network.

“Dividend flows to and from subsidiary companies are one of the main ways for multinational companies to redistribute profits generated by their operations worldwide,” states the report produced by World Animal Protection. Multinational corporations are often structured in order to avoid withholding taxes levied on dividends in certain jurisdictions like the U.S., while moving the flow of dividends to tax havens.

“Dividends that flow out of the operating company jurisdictions — like Australia, U.S., U.K, etc. — are treated as non-taxable in Luxembourg,” says Vasudeva.

Based on an analysis of financial statements, the World Animal Protection report found that “$11 billion in intercompany dividends flowed through JBS’s group of Luxembourg subsidiary companies,” allowing JBS to avoid paying U.S. withholding tax on dividends. In total, the report found that JBS’s Luxembourg companies paid just half a million in taxes between 2019 and 2022, while collecting $2.8 billion in pre-taxed profits.

Nikki Richardson, JBS USA’s head of corporate communications, did not respond to Sentient’s request for comment about these tax avoidance strategies.

A Proposal for Tax Reform

JBS’s unrestricted expansion has become a roadblock to achieving global climate goals, yet it gets little public attention.

The SOMO report notes how there is a “broad scientific consensus” on the need for dietary change — eating less meat and more plants — to limit rising global temperatures. But as the report points out, this important detail is often obfuscated by the meat industry, including through extensive lobbying campaigns that weaken the industry’s climate obligations.

JBS’s expansion serves to hinder progress on human and animal rights issues too. The company has a long, very checkered history of paving its expansion through highly unethical business practices, including illegal deforestation and destruction of Indigenous land, documented incidents of modern slavery in the company’s supply chain, working conditions linked to deaths during COVID-19 and other serious injuries in its meatpacking plants, and a well-documented track record of egregious animal welfare violations — incidents that JBS has largely been able to maintain as a business practice by paying government fines and settlement fees.

One potential solution Kiezebrink would like to see implemented is an international system of unitary taxation — also known as formulary apportionment — applied to multinational corporations like JBS. The proposed system would ensure that corporations are taxed in the same jurisdictions where they primarily conduct business. Under international tax law now, subsidiaries of multinationals are each taxed separately, which “provides companies with a lot of leeway to shift profits,” he says.

The proposed system would tax multinational companies as a single entity, dividing the taxes per jurisdiction based on a formula that incorporates factors like the sales, labor or assets in a particular location. The goal is to capture “the genuine economic substance of what they do and where they do it,” as Sol Picciotto wrote in a report published by the Tax Justice Network. “This would ensure that they make a fair contribution as corporate citizens towards the costs of the public services provided by the states where they do business.”

There is already an active effort to reform the current international tax system. The United Nations is negotiating a framework around international taxation, partially aimed at closing regulatory gaps that enable tax havens.

Tax haven reform would also help countries achieve their UN Sustainable Development goals, taking urgent action to combat climate change and hunger that has the potential to reign in corporate tax avoidance if enough countries participate.

Yet in February, the Trump Administration withdrew from this negotiation process — even though cracking down on tax havens would likely benefit the U.S. by preventing corporations from shifting profits produced in the U.S. to international jurisdictions.

With JBS now trading on the New York Stock Exchange, Vasudeva argues this too enables JBS to use money that otherwise would be taxed to grow “the factory farming model, which is bad for animals, bad for the environment, bad for biodiversity, and bad for their workers.”