Private
finance
Debt
Tax
justice
Aid
Financial
architecture

Sweet Nothings: The human cost of a British sugar giant avoiding taxes in southern Africa

Added 14 Feb 2013

Eurodad Member ActionAid have released a new report

The report examines the tax practices of one of the world’s largest food multinationals, the Associated British Foods (ABF) group, in one of the most impoverished places in which it operates. ABF produces staple brands like Silver Spoon sugar, Kingsmill bread, Ryvita and Patak’s, and also owns clothing chain Primark. The reports focuses on the activities of ABF’s Zambian subsidiary, Zambia Sugar Plc.

ActionAid's investigation found that Associated British Foods group's (ABF) Zambian subsidiary uses an array of transactions that have seen over a third of the company’s pre-tax profits – over US$13.8 million (ZK62 billion) a year – paid out of Zambia, into and via tax haven sister companies in Ireland, Mauritius and the Netherlands. Some of these transactions reduce Zambia Sugar’s taxable profits, while the structure of others avoids the Zambian taxes ordinarily levied on such foreign payments themselves. Thanks to this financial engineering, we estimate that Zambia has lost tax revenues of some US$17.7 million (ZK78 billion) since 2007.

This report shows how tackling the problem will require both national and international action across three fronts: companies’ ingenious financial engineering, weak international tax rules, and governments’ deliberate tax policies. While the group of companies detailed in this report have taken (lawful) advantage of loopholes in international tax laws, they have also benefited from tax breaks deliberately written into countries’ tax codes, responsibility for which ultimately lies with governments.

Solutions

  • Responsible companies must make paying their fair share of corporate tax a core part of their responsibilities to the countries where they make their profits.
  • Governments must close loopholes in national tax codes and tax treaties that allow the kinds of tax haven transactions outlined in this report. Donor and developed country governments have a particular responsibility to ensure that their own tax regimes and tax treaties do not make it easier for corporate profits to be siphoned out of developing countries.
  • Governments must not give away vital revenues through corporate tax breaks without evidence of real benefits to their citizens in terms of new jobs, economic opportunities and public revenues.
  • Finally, international action is needed to end the secrecy and abusive tax regimes of tax havens around the world.

Read the full report, Sweet Nothings, The human cost of a British sugar giant avoiding taxes in southern Africa

Read how Associated British Foods have responded.

Join the ActionAid's tax justice campaign here