SABMiller Accused of Dodging Taxes in Africa
One of the world’s largest beer manufacturing companies, SABMiller, has been accused of actively dodging its taxes in the developing countries where it operates, leading to nearly GBP 20 million in lowered tax revenues across the African continent.
On November 29th ActionAid, an international anti-poverty agency, launched a campaign accusing SABMiller, the world’s second largest beer company, of avoiding their full tax obligations in the developing nations where it operates, by actively structuring its operations and subsidiaries to lower the company’s overall corporate income tax obligations. While ActionAid does not contest the legality of the actions, the group protest the GBP 20 billion effect that the actions has on the economies of African nations and the fights against poverty.
In Calling time: why SABMiller should stop dodging taxes in Africa, a report released by ActionAid, it was explained how the brewing company allegedly reduces its tax obligations. SABMiller’s headquarters are located in the Netherlands, and require all of its African subsidiaries to pay royalties for the selling the company branded products and production by its recipes. In 2009 the six SABMiller subsidiaries located in Africa paid an approximate GBP 25 million in such royalties to the main company. According to the report, this structure reduces the amount of taxes paid by SABMiller in African by approximately GBP 10 million per year. Additionally, the brewer’s African subsidiaries are required to pay significant “management fees” to other SABMiller subsidiary companies located in low-tax zones around Europe. Across Africa SABMiller subsidiaries pay an estimated GBP 47 million in such fees per year, reducing the annual corporate tax revenues in the continent by GBP 9.5 million.
The report goes on to say that SABMiller further reduces its overall tax bill by GBP 700 000 every year by using a Mauritious registered subsidiary called Mubex. ActionAid claims that the products required for brewing beer in African are all procured by SABMiller subsidiaries through Mauritius, where the effective corporate tax rate is only 3 percent, compared to an average of 25 percent in the African countries. ActionAid stated that due to the strong secrecy laws in Mauritius, it is difficult to deduce the exact extent of tax savings made by SABMiller through this strategy, but estimates it to be approximately GBP 670 thousand. It is also claimed that Mubex provides SABMiller subsidiaries with very large loans, with the subsequent interest payments being used to reduce the company’s overall tax liabilities by GBP 76 000 annually.
The ActionAid report concedes that SABMiller’s actions are not at all illegal, and are actually in complete compliance with the law. However, ActionAid does question the ethical validity of diverting and reducing tax obligations in developing countries. According to the group, SABMiller’s annual tax reductions in Africa would be enough to cover the cost of sending 250 000 extra African children to school. ActionAid claimed further that SABMiller’s behavior is not at all uncommon for multinational companies operating in the region, even stating that the total tax loses seen in Africa every year are larger than all the foreign aid received on across the African continent annually. The group explained that if large corporations were to simply operate in developing nations without attempting to dodge their tax obligations, the subsequent tax revenues would greatly aid the international fight against poverty.
Photo by kamil.szewczyk