INTERNATIONAL PRESS: British Sugar Giant Dodges Zambian Tax Bill Big Enough to Put 48,000 Children in School a Year

(Lusaka, 10 February 2013) A new investigation released today by ActionAid has revealed that the Associated British Foods group (ABF), owner of Silver Spoon sugar and other household brands, is avoiding its tax bill in Zambia, one of the world’s poorest countries.

ActionAid’s report Sweet Nothings which focuses on the multinational’s sugar operations in Zambia has discovered that since 2007:

  • The company has generated profits of $123 million, but admits to paying “virtually no corporate tax” in Zambia.
  • It has exploited legal loopholes 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.

In a country where tax-funded education, health and nutrition services are suffering from a crippling lack of revenue, the losses from this single company could put an extra 48,000 Zambian children in school every year. The revenues lost to tax havens are 10 times bigger than the amount the UK gives Zambia in aid for education each year.

ActionAid’s Country Director in Zambia, Pamela Chisanga said:

“Taxes pay teachers, train nurses, provide healthcare and clean water. This is as true in poor countries as it is in rich ones.

“If Zambia is ever going to end its dependence on foreign aid, it must first be able to raise the money needed to provide for its own citizens.”

Headmaster Mr Sumatama, at 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. Some students have to stand at the back and write with their books pressed against their hands.”

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. In some years, small traders who sell the company’s products on road side stalls and shops and the company’s own sugar cane cutters have paid more tax, in absolute terms, than the giant multinational.

ActionAid is calling for urgent national and international action to end tax dodging. Associated British Foods and other companies must start paying their fair share of tax to the countries where they make their profits, and come clean about their tax affairs everywhere they do business. The Zambian government and other governments must close the loopholes in national tax codes and treaties and stop giving away vital funds through unnecessary corporate tax breaks.

ActionAid is calling on the G8 leaders in June 2013 to take decisive actions to strengthen international tax rules and work with developing countries to collect the corporation tax that is due to them.

ActionAid is working together with Zambians to stop Zambia Sugar from dodging taxes. Ordinary Zambians are sending messages making clear what their local schools need this vital tax money for.

ENDS

For interviews and more information contact: (In Zambia) Natalie Curtis on +44 (0) 7931 787025 or natalie.curtis@actionaid.org(In London) Anjali Kwatra on +44 (0) 203 122 0633 or +44 (0) 7941371357 or Anjali.kwatra@actionaid.org

Editors' notes
  • Download the full report here
  • Download the company’s right to reply here
  • ActionAid is accusing the Associated British Foods group of using legal tax avoidance techniques, not of illegal tax evasion.

 

How is ABF’s Zambian subsidiary shifting its profits into overseas tax havens?Mystery management in IrelandSince 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.

 

Dublin dog legIn 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.

 

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.

 

Get your own tax havenIn 2007 the company took the Zambian government to court to get a tax break designed to help domestic farmers. As a result, its tax rate has tumbled from 35% to just 10% in 2012. Tax breaks have cost Zambia $9.3 million in total.

 

What is ActionAid?ActionAid is a global movement of people working together to achieve greater human rights for all and defeat poverty. We believe people in poverty have the power within them to create change for themselves, their families and communities. ActionAid is a catalyst for that change.