Commodity Traders - the next shoe to drop?

While the focus was on the level of debt that can or cannot be sustained by Glencore one should also ask what amount of taxes are paid by the Commodity trading houses - most of them based in tax-friendly Switzerland. A lot of criticism was recently directed at the tax avoidance schemes employed by Amazon and Starbucks, to name just a few prominent names. But who really knows where the trading houses book their profits?
In my early years in the financial markets I was (partially) employed by a Panamanian firm while working in London. The same applied to my colleagues. Day in Day out we booked trades to this firm which was nothing else than a post box. Nobody had ever been there or spoken to anyone in Panama. All very legitimate - at the time. The authorities took everything on face value and a prominent Accounting firm put the stamp of approval on it. Coming back to the case of the Commodity traders one also has to ask how their fabulous profits are generated. Do investors and their lenders fully understand the story? Most commodities are produced by firms that are relatively large as the production tends to be very capital intensive. The same applies to the users, again mostly large businesses. Both parties should be sophisticated enough to find each other out ot a finite number of players on buy- and sellside. So what magic dust are the trading firms sprinkling to be able to put themselves between seller and buyer? On what terms? If you have the answer I would be happy to hear from you!
 (2 October 2015)