ActionAid had accused the company, the world's second-biggest beer firm, of avoiding millions of pounds of tax in India and Africa by steering profits generated there through a string of subsidiaries based in offshore tax havens. SAB says the development charity makes a number of ‘flawed assumptions’ in its report, and insists that it does not engage in ‘aggressive tax planning’ in any part of its operations. Clearly the brewer isn’t the type to watch someone throw peanuts into its pint glass without hitting back.
In a report entitled ‘Calling Time: Why SABMiller should stop dodging taxes in Africa’, ActionAid claimed that SAB reduced its African corporation tax bill by as much as a fifth last year, depriving poorer countries of up to 20m in tax. Just the kind of public row you don’t want when you’re a London-listed firm with annual profits of nearly £2bn. Especially since tax-dodging is such a hot political topic at the moment.
For its part, SAB pointed out that it’s a major direct investor, employer and taxpayer in the developing world: in the year ending March 2010, it says its total global tax contribution was just under $7bn, about 77% of which went to developing countries. It reckons its economic contribution to South Africa constitutes around 3.1% of GDP – and separate INSEAD research suggests that it also contributed $92m in added value to the Ugandan economy.
SAB also pointed out that these offshore subsidiaries were fully taxed in the UK as controlled foreign companies, and that centralising operations saved money and prevented it from being taxed twice for the same thing. In other words, SAB’s argument was that there’s nothing shady going on here – it’s transparent in all its affairs, compliant with tax laws, and is making decisions for commercial reasons. And therein lies the flaw in ActionAid’s argument, which the charity itself acknowledges: such techniques are not only commonplace but entirely legal.
Hence why these practices are not exactly uncommon among global corporates. But the kind of attention SAB is receiving will make other multinationals twitchy. Chances are that in these times of austerity, any suggestion of tax-dodging will go down like a dodgy pint, and could seriously undermine a company’s reputation. Expect to see more stories like this in the coming months...