SABMiller


2. Tax havens force poor people to pay the taxes of the rich

For example

…SAB Miller, the London-based brewing multinational whose transfer pricing techniques are depriving countries of much needed tax revenue.

The dirty details

SABMiller, whose brand names include Castle, Grolsch and Peroni, is the world’s second largest beer company,[1] with an annual turnover of £12 billion and profits of £2 billion.[2] Today, the multinational has interests across six continents, a far cry from its origins as South African Breweries in 1895.[3] Despite its now-international reach, the company that began in Africa still reigns supreme there, dominating the continent’s brewing industry.[4]

Even so, SABMiller has more tax haven companies (65[5]) than it has African breweries and bottling plants. Hmmm…

Tax avoidance reduces SABMiller’s African corporation bill by as much as one fifth,[6] giving the multinational a significant advantage over local competitors. That many of those selling SABMiller’s products at local stalls are paying more income tax[7] as a proportion of their income than the multi-million pound global business supplying them says it all.

Take Ghana, the world’s 28th poorest country. SABMiller paid zero income tax there between 2008-10 after shifting millions of pounds into notorious tax havens such as Switzerland and Mauritius.[8] Accra Brewery, Ghana’s second-biggest beer producer, supplies £29 million[9] of beer a year and rising. Despite this, the brewery made a loss between 2007-10[10] and paid corporation tax in only one of those four years.[11] In contrast, SABMiller worldwide showed pre-tax profits of about 16 per cent in 2009.[12] You do the maths.

Solutions

Country-level reporting on tax payments and other financial information to give a simple indicator of SABMiller’s contribution to the economy of every country where it brews and supplies its products.

Reduce financial transfers to tax havens by cutting management fee charges from tax haven subsidiaries, and keeping intellectual property rights to African brands in the countries from which those brands originate.
Integrate tax into SABMiller’s pre-existing sustainable development programme.

Government-strengthened tax legislation and revenue administration capacity in developing countries to deal with taxing multinationals.

Introducing unitary taxation would curtail transfer mis-pricing by taxing multinationals as a single unit, combining all the activities of the firm and eliminating profit shifting between its various parts. This would enable multinationals to be taxed on the basis of the economic substance of their activities, rather than on the dodgy legal structures they create in tax havens. The UK government estimates that 60 percent of international trade consists of intra-country transactions[13]. In other words, firms are trading with themselves, often passing through tax havens that charge low or zero interest rates on profits.

Key statistic

Developing countries are estimated to have lost up to £20 million to SABMiller’s tax planning, enough to put a quarter of a million children in school.[14]

The final word

From Martin Hearson, Tax Policy Analyst, ActionAid[15]:

Tax authorities in developing countries are fighting hard to stop tax dodging but the reality is they are locked in a David and Goliath-style battle with multinational companies. International standards governing the taxation of big business are stacked against them.

References

[1] http://www.reuters.com/article/2010/08/23/us-fosters-sabmiller-idUSTRE67M0TB20100823
[2] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p.10)
[3] http://www.sabmiller.com/index.asp?pageid=27
[4] http://www.sabmiller.com/index.asp?pageid=888
[5] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p.4)
[6] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p. 4)
[7] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p. 14)
[8] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (pp. 20-26)
[9] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p. 5)
[10] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p.12)
[11] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p. 5)
[12] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p.12)
[13] http://www.taxjustice.net/cms/upload/pdf/Development_Journal_-_CSR_to_the_Bottom_Line_-_SEP-04.pdf [accessed 4/11/11]
[14] http://www.actionaid.org.uk/doc_lib/calling_time_on_tax_avoidance.pdf (p.6)
[15] http://www.guardian.co.uk/business/2010/nov/29/sabmiller-india-africa-actionaid-report/print [accessed 11/11/11]