ACTIONAID EXPOSES TAX AVOIDANCE BY ASSOCIATED BRITISH FOODS GROUP IN ZAMBIA

ACTIONAID EXPOSES TAX AVOIDANCE BY ASSOCIATED BRITISH FOODS GROUP IN ZAMBIA

A new investigation released today by ActionAid has revealed that the Associated British Foods group (ABF), owner of Silver Spoon sugar, Ryvita and Primark, is dodging its tax bill in Zambia, one of the world’s poorest countries.

The report, Sweet Nothings, which is the result of 12 months of research focussing on the multinational’s sugar operations in Zambia, has discovered that since 2007:

·       Zambia Sugar has generated profits of $123 million, but admits to paying “virtually no corporate tax” in Zambia.

·       It has found legal ways to siphon over US$83.7 million (US$13 million a year) – a third of pre-tax profits – out of Zambia into tax havens including Ireland, Mauritius and the Netherlands.

·       Zambian public services have lost an estimated US$27 million as a result of the company’s tax avoidance schemes and special tax breaks which is enough money to put 48,000 children in school.

·       The revenues lost to tax havens is 10 times bigger than the amount the UK gives Zambia in aid for education each year.

Chris Jordan, a tax specialist at ActionAid and co-author of the report, said: “International corporate tax avoidance is like a cancer eating away at both rich and poor countries. As we’ve seen with Starbucks and Amazon, many multinationals are not paying their fair share of tax and this hurts ordinary people in the UK and in the developing world. Tax avoidance by Associated British Foods in Zambia is helping to keep people locked in hunger. We know that business can be a force for good in Africa, but this is massively undermined when a company doesn’t pay its fair share of tax.”

In Zambia 45% of children are malnourished and two thirds of the population live on less than $2 a day. Yet ordinary people pay their taxes. Shockingly, Caroline Muchanga, a market trader who lives next to the sugar plantation, has paid more corporation tax in some years than the giant company, while her children go to bed hungry at night.

Zambia is currently dependent on foreign aid and if this is ever going to end, it must first be able to raise the money needed to provide for its own citizens. George Sumatama, headmaster of Nakambala School in Mazabuka, where Zambia Sugar is based, told ActionAid: “Our school has no windows, doors or floors. Over a thousand children have to fit into just 12 classrooms, sitting in shifts and taught by 20 teachers. I think companies operating in Zambia should be paying more (tax) than they currently pay.”

Chris Jordan added: “This situation has got to change. Associated British Foods must pay its fair share of tax in Zambia. But this case also demonstrates that international tax rules are simply not fit for purpose. David Cameron must deliver on his commitment to secure a deal to stop rampant tax avoidance when he chairs the G8 this year. He has an amazing opportunity and he must seize it.”

ActionAid is part of the Enough Food For Everyone IF campaign which aims to tackle global hunger by calling on governments to close tax loopholes which enable corporates to avoid paying their fair share of tax.

ENDS

For interviews in the UK and in Zambia and for more information contact:

Anjali Kwatra on +44 (0) 7941371357 or Anjali.kwatra@actionaid.org

Or visit www.actionaid.org.uk/taxjustice

Notes to editors:

·         Download the full report here: http://www.actionaid.org.uk/doc_lib/sweet_nothings.pdf

·         See the company response here: http://www.actionaid.org.uk/doc_lib/company_response.pdf

·         ActionAid’s research found that the Associated British Foods group was using legal tax avoidance techniques. ActionAid is not accusing ABF of illegal tax evasion.

How is ABF’s Zambian subsidiary shifting its profits into overseas tax havens?

1.       Mystery management in Ireland

Since Associated British Foods bought out Zambia Sugar in 2007, it has paid its Irish arm over $47.6 million for ‘management fees’, despite the company accounts stating they have no employees. The company says this was an error, but in any case Zambia has lost an estimated $7.4 million in corporate and withholding taxes as a result.

2.        Dublin dog leg

In November 2007 Zambia sugar took a bank loan of US$70 million. On paper this loan is routed through Ireland to avoid Zambian tax on the interest charges. This has cost Zambia an estimated US$3 million in withholding taxes.

3.       Tax free take away

By shuffling the ownership of Zambia Sugar between the tax havens of Ireland, the Netherlands and Mauritius the company has reduced the withholding tax its pays on dividends in Zambian by an estimated $7.4 million since 2007.

4.       Get your own tax haven

In 2007 the company took the Zambian government to court to get a tax break designed to help smallholder farmers.  As a result, its tax rate has tumbled from 35% to just 10%. Tax breaks have cost Zambia $9.3 million in total.