Associated British Foods caught in Zambia tax avoidance

Associated British Foods (ABF), who own Silver Spoon, Kingsmill and Twinings Tea and is Europe’s biggest supplier of beef, has been caught avoiding tax payments in one of its subsidiaries in the southern African state of Zambia.

Zambia Sugar, ABF’s African firm, has paid virtually no corporation tax to the Zambia exchequer for three of the years between 2007 and 2012, and none between 2008 and 2010.

Zambia Sugar, which is owned by the biggest sugar producer in South Africa, Illovo, exports 50% of its capacity to Europe while the other 50% is consumed within Zambia itself.

Zambia Sugar admits it paid “virtually nothing in corporation tax,” said Lord Oakeshott, the former economist for the Kenyan ministry of finance.

The ActionAid report that broke the story also exposes a series of financial instruments involved in transferring profits abroad and downplaying revenues at Zambia Sugar.

The company has managed to keep its taxation towards the Zambia state at just 0.5%. This has been done through exporting profits to sister companies in tax havens including Europe’s Ireland and The Netherlands and off the east coast of Africa to Mauritius.

“We estimate that Zambia has lost tax revenues of some $17.7m since 2007, when ABF took over the Illovo sugar group,” the ActionAid report said.

Chris Jordan, a tax specialist at ActionAid and co-author of the report said: “This is a really shocking case where the Associated British Foods group has gone to great lengths to ensure it pays virtually no corporation tax in a very poor country. Tax avoidance is not victimless financial engineering. In Zambia 45% of children are malnourished and two-thirds of the population live on less than $2 a day.”

Illovo released an immediate statement opposing the story. The company said: “Since 2008 Illovo has invested £150m to double the production capacity in Zambia and so create the largest sugar mill in Africa,” and reiterated that “ActionAid could not be more mistaken.”

In 2010 the company, which employs 1,848 permanent workers and 3,530 seasonal labourers, commissioned its plant expansion project which doubled mill capacity and increased plantation to the cost of $174 million.

According to ABF the company also initiated social projects costing £3.94m including housing 16,000 people, proving them with water and constructing a maternity ward in Mazabuka District Hostpital.

Patrick Corby