Tax regulators from five African countries plan to meet this month to discuss the tax payments of global brewer SABMiller PLC, the latest sign that authorities on the continent are bolstering efforts to scrutinize outflows.
The June 28 meeting in Cape Town, South Africa, will follow reports from a nonprofit antipoverty group that said London-based SABMiller used various methods to reduce its tax liability in Zambia, Tanzania, Ghana and South Africa. The year-old, 31-member African Tax Administration Forum invited those four countries, plus Mauritius, to discuss SABMiller’s tax payments.
The forum’s mission is to train and provide technical support to tax officials in member countries so they can plug “leakages,” said Logan Wort, ATAF’s executive secretary.
“This is no witch hunt,” Mr. Wort said. “We’re saying: ‘Please come, please invest, but please respect the legislation that is there.’ ” The meeting doesn’t mean action will be taken against SABMiller.
SABMiller said it hasn’t dodged taxes and that the nonprofit group’s report is “flawed.” The company said it paid more than $2 billion in taxes to African countries over the past year.
Even as faster economic growth in Africa improves earnings, governments are struggling to fund improvements in health care, education and other basic services. That has fueled efforts to plug loopholes and stem corruption that allowed billions of dollars to leave the countries. Mr. Wort estimated that African governments struggle to collect even 30% of the taxes they are owed.
ActionAid, a London-based nonprofit antipoverty group, said last year that multinational corporations are depriving African countries of tax revenue.
The group said SABMiller costs governments in Africa and other developing countries nearly ?20 million, or about $30 million, a year in lost revenue. ActionAid said SABMiller reduced its tax liability by registering brands and paying managers through countries with comparatively low royalty fees and tax rates. The group said SABMiller’s weren’t illegal, but that countries should limit companies’ abilities to avoid higher tax payments.
SABMiller said it has paid what it owed. The company, with breweries in 11 African countries, said it paid $1.5 billion in taxes to South Africa and $600 million to other African countries in the year through May.
“SABMiller has worked in forums with ATAF in the past. We are open to discussing with them the allegations made by ActionAid,” a SABMiller spokeswoman said. “We do not engage in aggressive tax planning in any part of our operations, and the report includes a number of flawed and inaccurate assumptions.” The company said, for example, that the ActionAid report assumed a profit at SABMiller’s Accra, Ghana, brewery for a period when the operation was unprofitable.
Zambian authorities said they are investigating commodities trader Glencore International PLC, and its Mopani Copper mine. Following an audit of the mining industry, Glencore was asked to pay more taxes, Zambian officials said.
The audit, conducted by Grant Thornton LLP, said Glencore inflated its costs and undervalued its minerals, reducing its tax exposure. “There are clear indications from the comparative analysis that there are major problems with both the revenues and the costs of Mopani,” according to the audit report, which was reviewed by The Wall Street Journal.
Glencore which is listed in Hong Kong and London, said auditors failed to take into account factors that lowered the company’s exposure. For example, the company said that because it processes a large quantity of material for other companies, Glencore’s own exports are less than the audit assumed. Glencore also said that higher labor and electricity costs lowered the company’s earnings, reducing Glencore’s tax exposure.
The Glencore unit said the company’s own annual audit, by Deloitte LLP, “has always been unqualified and above the board,” according to an April advertisement that Glencore placed in Zambia’s Post newspaper.
Meanwhile, ATAF member Sierra Leone said it is reviewing multiyear tax agreements it had reached with mining companies, concerned that the agreements were unfavorable to the government.
Analysts said multinationals and major resource companies are able to find tax loopholes without evading taxes. “Multinational companies can easily take these countries for a ride,” said Dev Kar, a senior economist at Washington-based Global Financial Integrity, a nonprofit group aimed at curtailing illegal cross-border financial flows. “They have cards in their favor, whereas smaller countries do not have the skilled manpower.”