Tuesday, February 12, 2013

ActionAid's revelations on Zambia Sugar misleading, says ABF

ActionAid's revelations on Zambia Sugar misleading, says ABF
By Associated British Foods has dismissed ActionAid's asserti
Tue 12 Feb. 2013, 14:50 CAT

Associated British Foods (ABF), a British multinational food processing and retailing company headquartered in London, owns Illovo, Zambia Sugar's parent company.

An investigation by ActionAid found Zambia Sugar to have avoided paying taxes to government enough to put 48,000 children in school a year. ActionAid claimed Zambia Sugar had paid "virtually no corporate tax in Zambia since 2007".

Investigation findings released on Sunday showed that the company moved millions of kwacha out of Zambia and into tax havens like Mauritius and the Netherlands, reducing its taxable profits.

The company, which generated profits of KR550 million, was accused of siphoning over KR374 million out of Zambia and paying only 0.5 per cent of its pre-tax profits.

The report also accused ABF of "exploiting two separate tax breaks originally intended respectively for domestic Zambian farmers and big foreign investors."

But ABF hit back, saying ActionAid has attempted to use Zambia Sugar's tax affairs to gain publicity at the expense of accuracy.

"Illovo denies emphatically that it is engaged in anything illegal, immoral or in any way designed to reduce the tax rightly payable to the Zambian government," the Group said in a statement posted on its website yesterday.

"We are very proud of Zambia Sugar and the major contribution that it makes to the Zambian economy."

The group stated that despite Illovo's attempts to persuade ActionAid to improve its report by correcting errors and introducing more balance into its analysis, ActionAid decided to publish a "highly inflammatory account of the company's tax position that is incomplete at best and factually wrong in places."

"ActionAid's report alleges that Zambia Sugar pays fees to other parts of the Illovo group in order to reduce tax. This is absolutely not true," the group stated.

"These payments are made in return for the services of real people, doing real jobs, adding real value in Zambia and have nothing to do with tax planning. There are no royalty payments, no franchise agreements. The payments are for export services, third party contractors, and expatriate personnel in Zambia. The payments are charged at cost, and there is no artificial reduction in profit in Zambia Sugar as a result. The payments simply reflect the reality of the group's operations."

In its report, ActionAid stated that Zambia Sugar shifts its profits overseas to Ireland, Mauritius and the Netherlands, adding that it paid its Irish arm US $47.6 million for management fees despite company accounts stating that they have no employees there.

"ActionAid assertions are clearly illogical. There is no tax advantage in moving profits from Zambia where the tax rate is 10 per cent, to other group companies where the income would ultimately be taxed in South Africa at 28 per cent due to specific South African tax rules,"
ABF stated, adding that "ActionAid has clearly decided that its campaign should take priority over the facts."

The group stated that it does not engage in aggressive tax planning, adding that the group had an open and transparent relationship with all the tax authorities in the jurisdictions in which it operates.

The group further detailed taxes it has paid over the last five years and disclosed that it has £150 million to double the size of the sugar mill and improve productivity in Zambia in a move that would see gains benefit the nation for many years to come.

But ActionAid tax campaigner, Chris Jordan said tax was very important for developing countries just like it was for all developed counties around the world hence the emphasis by the charitable organisation.

"Tax pays for teachers, it pays doctors, it pays for road infrastructure investments and yet tax avoidance drains huge amounts of money from those economies," he said during a TV discussion programme on Aljazeera yesterday.

He explained that developing nations' lost revenue kept them dependent on international aid and handouts.

Stephen Barber, a British political economist, said tax avoidance had created an uneven playing field between local traders and multinationals.

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