British Company Under Fire in Global Tax Disgrace

| 12 Feb 2013 | 0 Comments

Zambia Sugar – a subsidiary of Associated British Foods – is accused of tax avoidance in Zambia, according to recent tax reports. The FTSE 100 company has been on the receiving end of a yearlong investigation by ActionAid and the extent of the damage is now visible.

Associated British Foods, owner of popular brands such as Kingsmill bread, Silver Spoon sugar and Twinings Tea, is said to be ‘under fire’ by ActionAid’s Tax Campaign. According to the non-governmental organisation, the tax avoided by Associated British Foods in Zambia is an estimated US $27million since 2007 – a figure large enough to help end hunger in the country.

Bad Form for British Brand

A report carried out by the Guardian found that Zambia Sugar not only avoids taxes, but benefits from liberal capital allowance and tax relied schemes. The report also shows that a third of the company’s pre-tax profits were transferred to ‘sister companies’ in Mauritius, the Netherlands and Ireland – all known tax havens.

Of the company’s $123m pre-tax profits, a mere 0.05% was paid in tax between 2007 and 2012 – a shocking figure that has appalled the Zambian government. The report also cited that the money Zambia Sugar withheld from Zambia, was 14 times bigger than the UK aid given to the state.

The company’s manipulation of the tax system in a country where malnutrition and poverty is rife, is a clear demonstration of Associated British Food’s corporate attitude.

Multinationals Abuse Tax Systems for Own Advantage

Zambia Sugar is just one of many multinationals who have come under the spectrum of tax authorities and action groups in recent months. Amazon and Starbucks were also found to be ‘avoiding tax’ and after widespread press coverage, the companies have been forced to change their tax structures.

According to reports, the total loss to tax avoidance by multinational companies in 3rd world countries is approximately £70bn a year; a figure that would otherwise have phenomenal benefits in developing countries.

Tax loopholes must be closed

UK Chancellor George Osborne is expected to take serious action on closing tax loopholes at the G20 meeting of world leaders. Without government support and attention, international tax systems cannot be monitored and loopholes will remain at the root problem for many developing countries.

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