“It’s legal – but is it moral?” asked an article on UK The Guardian referring to big transnational corporations taking advantage of legal schemes to reduce their tax contribution to the national treasures of the countries in which they operate. As it is the case raised by a year-long investigation by a British NGO, ActionAid, on the operations of Associated British Food (ABF), its subsidiary – the South Africa-based Illovo Sugar -, and what is reckoned as the largest sugar factory in Africa, Zambia Sugar, run by Illovo in a country that ranks 200 out of 228 according to an GDP per capita index.
ABF, Illovo Sugar and Zambia Sugar, says ActionAid, paid less that 0.5% of the USD 123 million pretax profits in corporation taxes between 2007 and 2012. A Cape Town report added that by winning a special retrospective tax break in 2007 and therefore receiving tax refunds, Zambia Sugar paid no corporate income tax between 2008 and 2010. The company says it was because of the “availability of substantial capital allowances,” others called it “aggressive tax management.”
Besides the tax schemes and strategies, ActionAid said, there’s also a complex set of linkages with sister companies based in Ireland, the Netherlands and Mauritius for payment of services and others. The news echoed in Ireland (the Irish government provides support to a health care centre in Nakambala, where Zambia Sugar is located!), South Africa, where Illovo Sugar has made into the Johannesburg Stock Exchange (JSE) Socially Responsible Investments for six years, and, of course, in Zambia.
Workers and their Union
By the time the news had hit the Internet, the National Union of Plantation Agricultural and Allied Workers of Zambia (NUPAAW) was heading for the third round of negotiations on terms and conditions of employment, including wages and other financial benefits. The first two meetings had been devoted to sharing information, including reviewing the company financial results as of 30 Sept. 2012, as well as conditions of service in similar companies in the country. Whether hard information and an explanation on the company’s accounting practices have been shared at these meetings, which are to inform negotiations, is not known to this writer, although readers would agree that any negotiation with a company that paid no corporate taxes is a difficult task indeed.
Permanent employees in Zambia Sugar currently earned a lowest monthly wage of ZMK 1,532,000.00 ( USD 294.62) with a highest wage of ZMK 3,200,000.00 ( USD 615.38); while seasonal employees get a lowest wage of ZMK 833,000.00 (USD 160.19), and the highest, earned by cane cutters, of ZMK 1,534,000.00 (USD 295.00). Of course, governments around the world try to attract foreign investment by offering tax schemes and benefits, but these can contribute to a level of unfairness in the countries themselves. Workers working for Zambia Sugar, with wages just stated, pay anywhere from 25 to 35 percent of their wages in income tax that, obviously, is more than the company’s corporation tax of zero!
Read here the ActionAid publication Sweet nothings. The human cost of a British sugar giant avoiding taxes in southern Africa.