Pingo Doce hands out leaflets to avoid boycott
- Created on Sunday, 08 January 2012 19:38
Pingo Doce supermarkets across the country have received bundles of leaflets for distribution to customers in a bid to avert a boycott. The leaflets contain a letter, signed by Chairman Pedro Soares dos Santos, and refer to "serious inaccuracies" in the reporting of the transfer of control of Pingo Doce’s holding company, Jerónimo Martins SGPS, to the Netherlands.
"On behalf of more than 25,000 employees who are employed at Pingo Doce in Portugal, and as a result of the many news reports and comments from various sources produced over the last few days containing serious inaccuracies, the Company believes three fundamental truths’ reads the note.
He does not refer the fact that Jerónimo Martins itself reported that the ‘Society Manuel Francisco dos Santos’ sold its 56.1% held in Jerónimo Martins SGPS to a subsidiary in the Netherlands.
In an official statement, sent last Monday to the Securities Market Commission, Jeronimo Martins reported that "on the 30th of December 2011, the company ‘Manuel Francisco dos Santos’ sold to the company ‘SGPS Manuel Francisco dos Santos BV (a subsidiary) 353,260,814 ordinary shares of Jerónimo Martins SGPS, representing 56.136% of the shares and 56.213% of the respective voting rights."
Despite the official statement, the leaflet states "three truths".
"Payroll tax is paid to the Portuguese State and its citizens will continue to be honored as usual."
"The registered office and tax residency of Pingo Doce remains, as always, in Portugal and a change to Holland was never a question."
"Jeronimo Martins, which owns most of Pingo Doce, also maintains its headquarters and tax residence in Portugal, continuing to contribute socially and fiscally in this country."
The leaflet ends by noting that "everything you hear or read to the contrary to what is stated here can be considered, with no room for doubt, false and/or demagogic."
The leaflet from Jerónimo Martins comes as a result of many negative press reports since January 2nd, when it was learned that the control of Jerónimo Martins would pass into the hands of a company based in the Netherlands. In addition to press commentary, there have been appeals on social media websites to boycott Pingo Doce stores, and the matter was debated in Parliament in the presence of the Prime Minister, Pedro Passo Coelho, last Friday.
At the time, the PM assured parliament that "the Tax and Customs Authority (ATA) is examining the tax aspects surrounding the operation [by Jeronimo Martins] in order to make a correct assessment of what happened."
In an interview with SIC News, broadcast on Saturday night, the Chairman of Jeronimo Martins explained that "all taxes arising from our work here (Portugal) will be paid here. Nobody touches them," explaining that the transfer was due to lack of financial stability in Portugal and 'funding problems."
"The only problem for me is the funding, we worked only with Portuguese banks and we were denied access to funding," said Soares dos Santos, arguing that the Netherlands offers the best environment to private investors.
Why the Netherlands? Between January and October 2011 almost 70% of the overseas investment from Portugal headed to the Netherlands, an amount equivalent to €6,587million. The volume of investments in the Netherlands for 2011 overshadows the more usual investment destinations of Portugal & Spain (10.5%), Brazil (4.8%) and Angola (2%).
However, these values are not unprecedented. In the last decade there have been several years when Holland soaked up between a quarter and a half of total Portuguese investments abroad.
According to the newspaper Público, most companies listed on the main Portuguese stock index, the PSI 20, have branches in the Netherlands. Jerónimo Martins already owns a Polish supermarket chain, ‘Biedronka’, through a Rotterdam based holding company.
The Netherlands is one of Europe's most attractive countries for tax planning by multinational companies. It has a relatively low income tax rate at 25.5%, and businesses based there can receive capital gains and dividends from subsidiaries without paying tax. It also has bilateral tax treaties spanning the globe ensuring the risk of double taxation is much reduced for companies involved in international trade.
Despite this balmy environment, the Jerónimo Martins Chairman insists "we will pay the same taxes" and has only moved the company to access investment finance, yet the tax burden in Portugal already has led many top companies to head for Holland in moves to pay far less tax than if stationed in Portugal.
Benefits, such as the exemption from taxation of dividends received by companies based outside the European Union, already have lured many of Portugal’s top names such as Mota-Engil, Grupo Espirito Santo, CGD Portucel, Galp Energia, and Sonae group to Dutch territory or other more benign jurisdictions.
José Soares dos Santos, executive director of Sociedade Francisco Manuel dos Santos, asserts that this transfer operation "has no tax implications". This statement and others need carful judgement.
