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Monday, 18 February 2013

Zambia: Western tax avoidance

A major multinational western company- Associated British Foods group (ABF)- was found to have used legal tax avoidance techniques to dodge its tax bill in Zambia.
A new investigation released by ActionAid, which is the result of 12 months of research focusing on the multinational’s sugar operations in Zambia, has discovered that since 2007the Zambian branch of the company, has generated profits of $123 million, with paying “virtually no corporate tax” in Zambia.
The company has done that mainly by whisking  away 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.
Also, the company also won a court case against the Zambian government, which enabled it to exploit a tax break originally designed to support domestic farmers. Thus, the company’s tax rate tumble from 35% to just 10%, costing a further $9.3m of revenue.
The report estimates that Zambia has lost $27m. The revenues lost to tax havens is 10 times bigger than the amount the UK gives Zambia in aid for education each year.
“International corporate tax avoidance is like a cancer eating away at both rich and poor countries. […]Tax avoidance by Associated British Foods in Zambia is helping to keep people locked in hunger. We know that business can be a force for good in Africa, but this is massively undermined when a company doesn’t pay its fair share of tax”, Chris Jordan, a tax specialist at ActionAid and co-author of the ActionAid report, said.  
ActionAid is part of the Enough Food For Everyone IF campaign which aims to tackle global hunger by calling on governments to close tax loopholes which enable corporates to avoid paying their fair share of tax.

Source: The Guardian, ActionAid