Charity accuses SABMiller of dodging tax

International anti-poverty agency ActionAid has launched a campaign accusing the world’s second largest brewer of avoiding paying corporate tax in Africa and thereby denying income to struggling economies.

Brewer SABMiller, joint owner of the Australian-based Pacific Beverages, denies the charge.

ActionAid says that SABMiller, owner of global beer brands Peroni and Grolsch, inappropriately siphons millions in profits out of its overseas operations into tax havens every year. The charity stresses that SABMiller’s actions are not illegal, merely suggests that the actions are unethical in denying much needed income to the region’s governments.

ActionAid says SABMiller controls more than one third of Ghana’s beer market and has generated revenues of AUD103m since 2007.

“But over the last two years, they haven’t paid one Ghanaian Cedi of corporate income tax to the Ghana government at their Accra brewery,” the charity claims.

“SABMiller siphons millions in profits from developing countries into tax havens. By reporting far lower profits, multinationals like SABMiller end up paying far less tax – and in some cases, avoid taxes all together,” ActionAid said in a statement to Australian Brews News.

ActionAid says it has found evidence of SABMiller practicing tax dodging in Ghana, Mozambique, Tanzania, South Africa, Zambia and India, enabling them to avoid paying an estimated $32 million in income tax.

“This could put 250,000 kids in school! Governments could spend this revenue on schools, hospitals, infrastructure and other vital services, making poor countries less reliant on foreign aid,” ActionAid says.

To raise awareness of the issue ActionAid has just launched a campaign exposing SABMiller’s practices in poor countries.

SABMiller has a growing presence in Australia through Pacific Beverages (Photo: Pacific Beverages / SABMiller)

SABMiller owns a half-share in Pacific Beverages that operates its premium brands Peroni and Grolsch and the local brand Bluetongue. The agency has called on Australian beer drinkers to email Pacific Beverages’ CEO Peter McLoughlin to urge SABMiller to:

1. Stop using tax havens to siphon profits out of developing countries.
2. Implement a tax code of conduct to explain how your sustainable development principles apply to your tax affairs.
3. Be more transparent, by publishing a basic set of accounts for every country in which you work – including tax havens.

For its part, SABMiller refutes the charges. Australian Brews News asked the brewing giant:

  • Does SABMiller pay income tax in Ghana? If so, how much?
  • If not, is it ethically appropriate for a company that generates profits in one country to pay tax in that country, irrespective of the legality of the mechanisms used to avoid doing do?

Nigel Fairbrass, Head of Media Relations for SABMiller, answered:

Our business in Ghana is in the early stages of development within the SABMiller group. The reasons for its low profitability – and low tax payments – relate to the intensely competitive nature of the local market in which it is a relatively small participant; also, escalating input costs; a significant depreciation in the local currency which impacts overall costs; and a recent increase in excise tax which has depressed consumer demand.

Corporation tax is a poor guide to the total tax contribution in countries like Ghana. In 2009 our business in Ghana paid GHS16.7m (approximately US$12m) in total tax contributions to the Ghanaian Revenue, including excise taxes and VAT. This amounted to approximately 33% of gross revenue and exceeds our profit before tax.

In addition, the company has invested extensively in capital expenditure over recent years to boost its business prospects and the SABMiller group will be investing capital of approximately US$7m in a much needed business recovery programme.

In response to the points in ActionAids email campaign, Mr Fairbrass replied:

SABMiller ha extensive brewery operations in Africa, including Botswana (Pic: One Red Eye/Philip Meech)

(1) Take a responsible approach to tax. Stop using tax havens to siphon profits out of Africa, for example by ending the huge payments for lucrative brand rights and management services to Switzerland and the Netherlands.

We completely reject ActionAid’s conclusions in its report and would counter that we do take a very responsible approach to tax. SABMiller does not engage in aggressive tax planning in Africa, India – or anywhere else for that matter. Nor do we ‘siphon’ profits. There are sound commercial reasons for the intermediate holding companies in our group structure such as those you mention in the Netherlands and Switzerland.

Compliance with tax laws underpins all of our corporate governance practices. We actively engage with revenue authorities and we are open and transparent in our affairs. We follow all transfer pricing regulations within the countries in which we operate and the principles of the OECD guidelines.

SABMiller’s history of investment in Africa goes back to the beginning of the last century, and we are immensely proud of our track record in developing successful and sustainable businesses on the continent. We continue to be a substantial direct investor and employer in Africa, and a major global contributor to government revenues.

In 2009 our total tax paid directly to governments amounted to just under US$7 billion, of which 77% was paid in developing economies. In the year 2009/10 we invested over US$500 million on the African continent alone.

You refer to the ownership of brands in the Netherlands, but our Dutch brand-owning company is not a tax avoidance vehicle. Its full profits are subject to full UK tax as a UK controlled foreign company (“CFC”) and this has been the case since the group’s primary listing on the London Stock Exchange in 1999.

You refer to management fees paid to a Swiss company. Management fees cover a range of corporate services, including: financial consulting; human resources; corporate communications; marketing support; IT support and data processing to a number of group companies. By centralising and standardising these services we can offer local entities a higher quality service more efficiently than if they were to purchase such services from third parties. Given that these corporate services are organised and provided through our UK head office, having one central point for service charges is sensible. This centralisation avoids the need for multiple contractual and invoicing arrangements and therefore benefits the African countries by cutting administrative costs. The treatment of the costs incurred in providing the services is in accordance with generally-accepted transfer pricing principles, including the OECD transfer pricing guidelines.

(2) Understand and disclose the impact of its tax planning. SABMiller needs a tax code of conduct to explain how it applies its sustainable development principles to its tax affairs. It should be open and transparent about its use of tax havens and tax avoidance techniques.

We do disclose the tax we pay on p.10 of our our Sustainability Report. Compliance with tax laws underpins all of our corporate governance practices. We actively engage with revenue authorities and we are already open and transparent in our affairs. We follow all transfer pricing regulations within the countries in which we operate and the principles of the OECD guidelines.

(3) Be more transparent about financial information. Make public the accounts of each of its subsidiaries – especially for companies in countries where accounts are kept secret – and provide a country-by-country snapshot of tax payments and other financial information.

In the past ActionAid has made some constructive contributions to the debate on tax. We support their recommendations regarding improved management of taxation in developing countries, including greater investment in the capability of local tax authorities and that business should be taxed fairly.

Their report ‘Accounting for Poverty’ report states: “Governments should aim to strike an optimal balance between raising revenue and attracting investment that benefits poor people when setting corporate tax rates and offering tax incentives.” We agree, but we do not believe that they undertook this particular piece of research in the same spirit.

You can read ActionAid’s full report on the issue here.

You can read SABMiller’s corporate response here.

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