ADM runs into tax trouble

Archer Daniels Midland is facing tax bills running into several hundred million dollars because of challenges by the Brazilian government over hedging losses claimed by the group in the past several years.

The US grains trader, which is seeking Australian government approval to pursue a $3.2 billion takeover of Graincorp, has lost two rounds of challenges with authorities over $US570 million ($603.6m) of claims relating to 2004, 2006 and 2007, which could rise by a further $US100 million if its tax claims for subsequent years are challenged.

The disclosure, in the group's most recent annual report, comes as the US Securities and Exchange Commission and the Department of Justice investigate ADM for possible legislative breaches.

ADM disclosed recently it had more than doubled to $US54 million the amount set aside for potential penalties for alleged breaches of Foreign Corrupt Practices legislation in the US.

ADM has yet to provide details but the large provision has sparked speculation its violations were more severe than suspected.

In Brazil, the Federal Revenue Service has challenged tax deductions relating to commodity hedging losses and related expenses. If appeals in administrative tribunals fail, ADM said it could take the matter to Brazil's federal courts.