SABMiller met MPs on tax in developing countries
The UK parliament’s International Development Committee (IDC) is seeking transparency from oil, gas and mining firms over the amount of tax paid in developing countries. A parliamentary inquiry is likely to press the UK government into signing an international agreement to force these companies to report on how much tax they pay to developing countries.
The recommendation is expected to follow the conclusion of a series of select committee hearings in front of the International Development Committee, including a session on 24 April 2012 when two of the largest multinationals listed on the London Stock Exchange – brewer SABMiller and commodity trading group Glencore – insisted it would be difficult and costly for them to make wider disclosures on taxation.
Senior executives from Glencore and SABMiller appeared to resist calls by campaign groups, like ActionAid, for more transparency. In November 2010 the UK charity ActionAid published a report on SABMiller’s tax dealings in Africa entitled "Calling Time: Why SABMiller should stop dodging taxes". The report accuses SABMiller of depriving governments in Africa and India by as much as GBP 20 million (EUR 24.5 million) per year in tax revenues.
The parliamentary committee’s chairman, Malcolm Bruce, said that one proposal being considered was for the UK to sign up to Extractive Industries Transparency Initiative (EITI), a programme designed to increase transparency over payments by companies to governments and to government-linked entities. Mr Bruce said: “The U.S. is considering signing up. Colombia is committed. The UK doesn’t appear to be. That may well be … a clear omission.”
During questioning, Mr Mackay, CEO of SABMiller, told the committee: “This transparency drive to achieve a right outcome, we believe, is doomed.”
The EITI was announced by then Prime Minister Tony Blair at the World Summit for Sustainable Development in Johannesburg in 2002. Despite it originating in the UK, the British government has never signed up to the scheme. So far, most of the countries that have implemented EITI are developing countries, although last September President Obama committed the United States.
ActionAid’s tax justice campaign manager Martin Hearson, who gave evidence to the committee in February this year, said after the April hearing: “In response to questions from the International Development Committee today, the replies from companies with serious allegations to answer was the same old smoke and mirrors routine. Tax dodging by multinational companies is a massive problem for developing countries, and it is disappointing that both SABMiller and Glencore continue to pretend that their elaborate corporate structures play no part in the existence of this problem.”
Increasing tax-raising capacity and expertise is the key to helping developing countries to collect the "right amount" of tax from the multinationals, Mr Mackay told MPs. Country-by-country reporting of profits and taxes paid could provide an "enormous" amount of detail, but given the complexity of international corporate taxes it would remain "extremely difficult" to judge whether the right amount had been paid, he suggested.
Around 70 percent of SABMiller’s profits come from developing markets and SABMiller argues that it is investment from the private sector, rather than aid, which drives economic growth and job creation. The company supports the strengthening of tax systems in Africa, as sound tax policy and efficient tax administration help to create the stability and certainty that enables business to flourish, generating employment and local growth.
Mr Mackay said: "We agree with the International Monetary Fund’s position that fair and efficient tax revenue systems are essential to the long-term sustainability of public finances in low-income countries. Beer is a local product: brewed, sold, and consumed locally and we have a vested interest in effective local public services and the revenue infrastructures that support them.
"But equally important is economic development and job creation; and we support measures which seek to improve the environment for businesses both big and small in Africa, allowing them to support development and create sustainable livelihoods."
The UK’s Guardian newspaper reported after the hearing that the committee was "likely to press" the UK government into signing up to the EITI project, "forcing oil, gas and mining companies to report how much tax they pay to developing countries".
Several NGOs support EITI but argue that country-by-country reporting should apply to all multinational companies.
Glencore has previously stated its commitment to the EITI and providing a breakdown of its tax payments by region.
The select committee is expected to publish its report in the next six weeks.
