A summary on the report by ActionAid on the SABMiller Case in relation to Tax Avoidance by the Company in its operations in Africa

1. LAW OF TAXATION IN GHANA
TAX AVOIDANCE AND TAX EVASION
The SABMiller Case Summary
PATRICK A.N. ABOKU
22.04.2019

2. Outline
 Introduction
 The Case for Calling Time
 SABMiller: Four Ways to Avoid Tax
 Prescription for SABMiller
 Government’s Responsibilities

3. Introduction
 SABMiller is the worlds 2nd Largest brewery in the World with its largest
breweries in African
 ActionAid undertook an elaborative study into the activities of SABMiller
and reports of a widespread tax avoidance schemes
 SABMiller denies most of the claims insisting it is committed to
sustainable development
 Details can be obtained in the SABMiller Case – Calling Time by
ActionAid Calling Time on Tax Avoidance

4. The Casefor
CallingTime
 OECD appointed by rich nations as a global center for the fight against
tax dodging estimates that Africa loses several times more revenue to tax
havens than it receives in aid
 The following activities are legal
 the lucrative search for ways to pay less
 creating complex structures
 routing money through opaque tax havens
 and employing highly paid professional to find loopholes is legal
 But are they ethical?
 The million dollar question remains unanswered
 Hope
 The tide is turning against tax dodging in developing countries
 South Africa’s Finance Minister has described “aggressive tax avoidance” as
a “serious cancer eating into the fiscal base of many countries”
 NOTE:
 Ghana’s tax revenue is about 22% way above its neighbors but below 36%
average for developed countries

5. SABMiller:
FourWaysto
AvoidTax
 Transfer pricing made by SABMiller to its subsidiaries from developing
countries to tax havens like Mauritius, Netherlands and Switzerland
reduced profits and then the tax bill
 There are questions why the OECD’s guidelines for transfer pricing is
suitable for developing countries?
 Others advocate for the systems used by USA and Brazil, because the
OECD’s guidelines might be too complex to adopt

6. SABMiller:
FourWaysto
AvoidTax
 Tax Dodge Strategy 1: Going Dutch
 Local brands are sold by SABMiller subsidiaries in developing countries are
owned by Companies in Netherlands
 In Netherland the tax rules makes companies to pay next to nothing for
income from royalties
 Ghana has a Double Taxation Agreement with Netherland
 The brewery in Ghana pays huge sums of money in dollars for these brand names
as royalties
 The company in Ghana reports less or not profits at all
 Thus it pays no tax at in Ghana and as well enjoy the tax haven in Netherland
 Tax Dodge Strategy 2:The Swiss Role
 Payment of management services in fees to subsidiaries in Europe especially
Switzerland where rates are very low
 In Ghana it is 4.6% but much lower in other countries.
 In Ghana once there is an agreement with a foreign country for management
services, it is enough to comply with the law

7. SABMiller:
FourWaysto
AvoidTax
 Tax Dodge Strategy 3:Take a trip to Mauritius
 In ordering raw materials, the company ordered through a company in
Mauritius to take advantage of the tax haven
 Mauritius is not the origin of these raw materials instead SA is
 Mauritius is not the easiest in terms of routing and access
 In fact Mauritius is thousand of miles away from the Indian Sea
 The objective is to increase the profits in the company in Mauritius by adopting
transfer pricing strategies and benefiting from the tax laws
 Tax Dodge Strategy 4:Thinning on top
 SABMiller borrowed so much from the company in Mauritius to the extend
than the company in Ghana was thinly capitalised
 It is instructive to note that it borrowed to an amount no financial institution
will ever accept to borrow out to any company or individual

8. Prescriptionfor
SABMiller
 SABMiller insisted through its management that they were committed to
sustainable development
 However, no where in their strategy or vision was this ever captured
 ActionAid therefore makes the following prescription for SABMiller
 Undertake responsible tax payments
 Adopt a responsible approach to tax
 Stop using tax havens to siphon profits out of Africa
 E.g. by ending huge payments for lucrative brand rights and management service
fees in Switzerland and Netherlands
 Understand and disclose the impact of its tax planning
 It needs to a tax code of conduct
 It should be open and transparent about its use of tax havens and tax avoidance
techniques
 It should be more transparent
 Especially about financial information
 It should provide country-by-country tax payments especially in the secretive tax
havens

9. Government’s
Responsibilities
1. Strengthen tax legislation and revenue administration capacity
especially in developing countries to deal with Multination
Corporations
2. Improve transparency of corporate reporting by making companies
financial reports and beneficial ownership information accessible to the
public.
3. Developing countries must not give up their right to tax royalties and
other management fees. Especially when negotiating Double Taxation
Agreements.
4. Developed countries should examine and where necessary reform the
way they tax multination corporations in order to make tax avoidance
less lucrative in developing countries
5. G20 and EU countries should also work together to bring a threat of
renewed action against tax havens
6. Upgrade the United Nations Committee of Tax Experts to an
intergovernmental body in which political issues of international
taxation can be discussed

10. Thank You
Discussion
Note that I own no Copy Right to the Content.
I summarized to the best of my understanding from ActionAid’s Report on for
SABMiller in it Calling Time for Tax Avoidance Report
The following persons were acknowledged by ActionAid in their report
(Written and researched by Martin Hearson and Richard Brooks Thanks to Emmanuel
Budo-Addo, Adwoa Kwateng-Kluvitse and Anna Thomas)