SABMiller still in deep water over African tax issue
Businesses face the risk of seriously damaging their reputation if they do not make tax planning part of their corporate responsibility programmes, says anti-poverty charity ActionAid.
On 11 July 2011 ActionAid launched a report on how companies can proactively commit to ‘Tax Responsibility’. Speaking at the Oxford Centre for Business Taxation’s annual conference Martin Hearson, ActionAid’s tax policy advisor, warned that a failure to respond will leave businesses open to reputational risk.
Martin Hearson said: "So far businesses have reacted to criticism of their tax avoidance by denying any responsibility. This is exactly how the fashion industry reacted when claims of ‘sweatshop’ abuses emerged in the 1990s. Just as fashion companies who failed to take these allegations seriously incurred major reputation damage, so businesses accused of tax avoidance need to respond with more than reflex denials."
ActionAid’s latest report follows a meeting of African tax authorities in June 2011 which discussed ActionAid’s allegations that brewing company SABMiller avoided millions of pounds of tax in Africa.
The meeting’s outcome is that tax authorities in South Africa, Tanzania and Zambia are now working together to prevent multinational companies from avoiding taxes and depriving their countries of money that could be used to fight poverty.
David McNair, a tax researcher for Christian Aid, another charity, was reported as saying that the steps being taken by South Africa, Tanzania and Zambia are proof years of lobbying are having an effect.
Activists, for months, have pointed to multinational beer company SABMiller as one example of how accounting sleight-of-hand can reduce a tax burden in African countries.
While SABMiller isn‘t breaking any laws, ActionAid is questioning the ethics of depriving "governments of significant amounts of tax – enough money to educate a quarter of a million African children".
ActionAid says one common method involves determining prices for payments made by a multinational‘s subsidiary in a developing country for goods or services provided by a sister company based elsewhere. Tax authorities would ideally like to see the payments be based on market prices, but that can be difficult to confirm or enforce. The result can be reducing or eliminating a subsidiary‘s taxable profits.
SABMiller has repeatedly said that it adheres to international standards on what is known as transfer pricing, and follows regulations in the countries in which it operates.
In June SABMiller released a report by Professor Ethan B. Kapstein of INSEAD, which revealed the economic and social contribution made in Ghana by its subsidiary companies, Accra Brewery Ltd (ABL) and Voltic – the country singled out by ActionAid in its initial report on SABMiller (“Calling time: why SABMiller should stop dodging taxes in Africa”), which came out in November 2010.
ActionAid had found that SABMiller’s Ghana subsidiaries have paid no corporation tax at all for the last two years.
Prof Kapstein’s report says that ABL and Voltic are significant contributors to the Ghanaian economy through tax contributions. Direct contributions of USD 22.2 million equate to 0.5 percent of total tax income and economy-wide contributions of USD 45.7 million represent 1.1 percent of the country‘s total tax income.
ActionAid’s Martin Hearson told BRAUWELT International that the new report from SABMiller misses the point of their campaign entirely. “We are aware that multinational businesses make a substantial contribution to the economies of developing countries, but this does not excuse their tax avoidance.”
“The tax figures in SABMiller‘s Ghana report are being used in a misleading way. Most of the USD 22 million that they claim to pay in Ghana is actually alcohol tax, which is levied on consumers. Their corporation tax payment is just USD 0.3 million,” Mr Hearson said.
“We want an open, sensible debate with SABMiller, but what they‘ve given us here is just a whitewash,” he added.
Looks like SABMiller will have to do better to appease the campaigners.
