Tax Avoidance in Zambia Denied by Associated British Foods

By Richard Watson. 11th March 2013.

The owner of multi-million dollar clothes retailer Primark, Associated British Foods has rejected the claims to any immoral or illegal activities targeted towards the avoidance of tax following a globally functioning charity accusing the British firm of relocating its profits out of the Zambian grounds in order to trim down on its taxation bill. According to ActionAid, Zambia Sugar, an entity of the FTSE 100 AB Foods Company, made a total number of €92 million ($123 million) profits since the year 2007, though it had only paid almost no business tax within Zambia.

ActionAid also suggested in its report that the holder of Silver Spoon and Twinings sugar and tea brands had come across legal ways of relocating a third or $83.7 million of the entity’s pr-etax profits outside of Zambia for avoiding tax, entitling it “Sweet Nothings”. A statement published on Sunday by Associated British Foods over its website revealed that the company’s Zambian unit strongly denies the allegations that it’s involved in anything immoral, illegal, or in the slightest way intended towards decreasing the tax that’s rightly due to the Government of Zambia.

The UK based company said that it does not involve itself in forceful tax planning within Zambia. The statement further revealed that the unit has a transparent and open relationship with the tax levying authorities on the whole, within its jurisdiction of operations. According to Associated British Foods, at the end of March 31st, 2012, i.e. when the year ended, the group’s effective rate of tax was 30.3%. Also, the unit had paid €142million (£120 million) in taxes within the past five years along with collecting an additional £180 million through sales taxes and employments.

ActionAid’s reaction towards this statement was that it stood by its original report. The report’s co-author, Chris Jordan said that none of the arguments presented by AB Foods were enough for revealing the entire story or even tallying up as the report was concluded after a lengthy investigation that lasted a whole year.

Corporate Tax avoidance legally directs profits between subsidiaries on an international level. This is a mechanism that’s referred to as transfer pricing, which has become a rather broiling political issue making firms like Google, Amazon, and Starbucks face political pressure and protests.