10 February 2013

Zambia: British Sugar Company in Zambia Tax Scandal

Zambia Sugar, a company owned by Associated British Foods, has been discovered to be paying a shockingly low 0.05% in tax of of its $123m pre-tax profits in corporation tax between 2007 and 2012.

This information was revealed by ActionAid as part of their "Tax Justice" campaign following a year-long investigation, and was first reported in the Guardian.

Associated British Foods is one the UK's largest producers listed in the FTSE 100, and owner of famous brands such as Silver Spoon sugar, Twinings Tea and Kingsmill bread. According to the ActionAid investigation, the company has been avoiding paying millions of pounds of tax to Zambia, where many citizens suffer from poverty and malnutrition.

According to Guardian report, Zambia Sugar benefits from generous capital allowance and tax-relief schemes, but it also funnels around a third of its pre-tax profits to sister companies in tax havens, including Ireland, Mauritius and the Netherlands. Tax treaties between Zambia and some of those countries mean the state's revenue authorities are unable to charge their normal tax on money leaving their shores.

"This is a really shocking case where the Associated British Foods group has gone to great lengths to ensure it pays virtually no corporation tax in a very poor country," said Chris Jordan of ActionAid, as quoted by the Guardian. "Tax avoidance is not victimless financial engineering. In Zambia 45% of children are malnourished and two-thirds of the population live on less than $2 a day."

The managers of the sugar company deny any wrongdoing. A spokesman for ABF's subsidiary company, Illovo, the immediate owner of Zambia Sugar, said: "We deny emphatically that Illovo is engaged in anything illegal, immoral or in any way designed to reduce the tax rightly payable to the Zambian government. We are proud of Zambia Sugar and the major contribution it makes to the Zambian economy.

The company spokesman pointed out capital investments of 150 million pounds to create the largest sugar mill in Africa, and the employment of 5,000 Zambian workers. The company says that the capital allowance was made in order to make this large investment possible.

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