Salmon farmer workers investigated over subsidy fraud

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Nova Austral denies wrongdoing.

The Chilean salmon farmer Nova Austral, which half owned by private equity firm Bain Capital, revealed in its latest Q2 report that a new criminal case against five individuals (including former managers of the company) is ongoing, related to the incident last year.

In 2019 the salmon-farming company located on the far southern tip of Chile, half-owned by private equity giant Bain Capital, was at the centre of a data rigging scandal.

“The pending legal and regulatory matters are progressing, however with limited developments since last report. The latest development is a new criminal case against five individuals (including former managers of the company) related to the incident last year,” Nova Austral wrote in its report.

The case surrounds the benefits around the Navarino Law, a law that provides a financial buffer to Nova Austral, that exempts it from income tax. In order to increase economic activity in the south of Chile, Region XII, the government introduced the Navarino Law in 1985. To qualify, the criteria is that sales are not in Region XII and local inputs (including labour), represent 25 per cent cost of output.

The law is effective until 2035, and Nova Austral receives the following benefits from operating in the region:
•Subsidy: 20% subsidy of sales
•Tax: Exempt from First Category Income Tax of 27 per cent.
•VAT: Exemption from VAT
•Import: Overseas goods that are imported are exempt from customs duties and stamp tax.

Many salmon farmers benefit from the law such as Cermaq Chile, Salmonese Magallenes, Australis and Blumar etc. For Austral, the financial buffer is a direct EBITDA-contributor, 60 per cent in this case.

To SalmonBusiness, a spokesperson explained that some workers are being investigated over subsidy fraud.

A specific payment four month payment was withheld because of a charge of subsidy fraud against former employees of the company. The case can only prosecuted against individuals, not legal entities, a legal represrentative working with Nova Austral said. The company denies wrongdoing and no arrests have been made.

“The Navarino Law benefits have not been suspended, nor has the ability of Nova Austral to continue requesting payment of such benefits for other periods been limited. Only a specific payment covering up to four months was wrongly withheld in connection with a criminal case against five individuals (including former employees of the company). The company filed a legal remedy to revert the ruling that ordered this withholding and hope that this is a situation will be resolved soon,” said the representative.