The litany of major multinational companies accused of tax avoidance has grown, with Associated British Foods – owners of brands ranging from Silver Spoon and Ryvita to Primark – added to the list including Vodafone, Starbucks, Barclays and Boots.
The one big difference is that this time ActionAid is not accusing the company of finding "clever" ways to shrink their British tax bills but those owed in Zambia, where two in three people live below the poverty line and 45% of children are malnourished.
The financial engineering performed by Associated British Food's Zambian sugar operations follow an all-too familiar pattern of tax liability reduction. Pre-tax profits of $123m generated since 2007 have been whisked away through the tax havens of Ireland, Mauritius, the Netherlands and Jersey, depriving Zambia of some $17.7m. That's enough to put 48,000 additional Zambian children in school a year.
Associated British Foods has responded with John Bason, ABF's chief financial officer, arguing: "I've looked really closely at this, and the payments made by the sugar business [to Ireland and Mauritius] are all for services provided and it is at cost." But it's odd then that the Irish accounts show profits of 26% on these huge "management fees". It's also not accidental that these fees are going to Ireland, which allows the company to exploit an abusive tax treaty preventing Zambia applying the normal 20% withholding tax levy on these transactions.
On top of these fairly standard tax avoidance schemes, the company also won a court case against the Zambian government, enabling it to exploit a tax break originally designed to support domestic farmers. This saw its tax rate tumble from 35% to just 10%, costing a further $9.3m of revenue. We estimate Zambia has lost $27m in total – a huge sum for one of the poorest countries in the world.
The sad thing is that African nations (just like the UK) desperately need the jobs and investment that big business, such as Associated British Foods, can provide. Yet the positive impact companies bring is massively undermined by systematic tax avoidance, which ultimately means fewer teachers and doctors can be employed, stunting development overall.
Like the independent British coffee shops and booksellers outraged by the lack of a level playing field when faced with the likes of Starbucks and Amazon, domestic Zambian businesses also suffer. ActionAid met market traders like Caroline Muchanga, who in some years has paid more business tax in Zambia – in absolute terms – than the giant multinational she lives next to, despite the fact that her children go to bed hungry at night.
While we believe that companies have a responsibility to shun aggressive and artificial tax practices, ultimately it's the rules of the game that have to change. Permissive international corporate tax rules were built for a bygone era and are simply not fit for purpose in today's globalised economy.
Leaders from India, South Africa, Argentina, Senegal and indeed Zambia have been calling for systemic change to fix a broken system and there's certainly been no shortage of handwringing rhetoric from UK politicians; from George Osborne telling us that tax avoidance was "morally repugnant", to David Cameron imploring big business to "wake up and smell the coffee" on the issue. Now it's time for the politicians to put their money where their mouths are.
Securing the visionary international agreements we need won't be easy, but there are signs that big breakthroughs are on the horizon. The US and EU have recently tabled legislation making extractive industries much more transparent about their financial contributions, though of course this will have no impact on a company like Associated British Foods. The US is twisting the arm of tax havens to eliminate the secrecy that enables tax avoidance and evasion to flourish unchecked.
This week, the G20 finance ministers will discuss new proposals on how to make transient multinationals pay their fair share, with Britain, France and Germany raising expectations of a breakthrough.
Cameron has already (and admirably) stuck his neck out by making tax and transparency priority issues as chair of the G8 this year. There are even rumours that he'll lead the way by forcing the 50% of tax havens with close constitutional links to the UK to break their culture of secrecy.
While these highwire political processes might seem a world away from Muchanga's market stall in Zambia, this year we have a golden opportunity to give her children a better future. It won't happen without a fight, so we need to keep the pressure up on our political leaders to deliver a fairer tax system for us all.