DAMNING ALLEGATIONS have been levelled against tobacco giant British American Tobacco (BAT) that the company is being investigated for tax evasion in various developing countries including SA.
It further states it is taking advantage of accounting loopholes to systematically shift profits out of low- and middle-income countries to avoid paying the full corporate income tax in the countries that most need these revenues.
According to Campaign for Tobacco-Free Kids (CTFK) in South Africa says, ‘this report is shocking and South Africa has not escaped this financial exploitation from big tobacco’.
The SA Revenue Service says it is owed R143m by the local arm of BAT as a result of tax fraud and evasion. A letter from Sars to BAT-SA on October 25, 2018 says the alleged contraventions were discovered after a Sars audit, says Zanele Mthembu from Advocacy Consultant for the Campaign for Tobacco-Free Kids (CTFK) in South Africa.
The allegations further indicate that in 2016, British American Tobacco shifted over 12 percent of the company’s global pre-tax profits – $942 million – to just one subsidiary that is based in the UK, where BAT paid almost no tax.
This is just the tip of the iceberg for a company with over 100 offshore subsidiaries across 19 tax havens, it said.
“In fact, British American Tobacco is already in tax disputes in countries including Bangladesh, Brazil, Egypt, South Korea, South Africa and the Netherlands for a total of over $2 billion, if the judgments were to go against the company.
The beleaguered company also faces investigations for corruption in the U.K, Romania and Kenya,” read the media statement.
In her response Mandlakazi Sigcawu, Corporate Affairs Manager, Southern Africa Area British American Tobacco South Africa- said previous South African media reports alleging local tax disputes with SARS are incorrect and issued a long statement:
“British American Tobacco South Africa (BATSA) today (in April) announced that it will commit all of a R30 million SARS rebate to the #TakeBackTheTax initiative fighting the illegal trade in cigarettes.
BATSA, which collected and paid more than R9.1 billion in taxes in South Africa last year, expects to receive the rebate for overpaid taxes shortly.
It will be committed directly to tackling the massive illegal trade in cigarettes being run by criminal billionaires, which currently costs South African taxpayers R8 billion every single year.
Johnny Moloto for BATSA said the money would be allocated to the successful #TakeBackTheTax initiative.
“#TakeBackTheTax has shone a light on the illegal activities of these criminal billionaires who are robbing South Africans and we are proud to continue supporting it,” said Mr Moloto. “We are also highly encouraged by the actions that have been taken by the new SARS leadership in cracking down on this illegal trade after years of deliberate neglect.”
The Nugent Commission heard, directly, that SARS was deliberately neutered to allow illegal cigarette manufacturers break the law with impunity and leech billions of rands every year out of the pockets of South Africans.
“BATSA was not a beneficiary of this corruption by rogue SARS agents. It, like all other taxpayers in South Africa, was a target. We are the only local tobacco manufacturer in the country that declares all our production and pays all our taxes,” added Mr Moloto.
Meanwhile, BATSA said that reports today that it owes R143 million (equivalent to less than six days of the tax it collects and pays to SARS every year) to tax authorities are false.
“We don’t owe any money for underpaying tax. We are, in fact, owed money for overpaying. That is why we are due this R30 million rebate.
“We are very confident that any analysis of our operations, and the volumes of documentary evidence we have supplied to SARS, by any auditor with the appropriate experience in Customs and Excise will conclude that we are utterly compliant, fully paid-up, and due the rebate, which will be used to continue to fight the illegal trade,” said Mr Moloto.
“South Africans continue to be ripped off by connected billionaires who are taking at least R20 million out of their pockets every single day. These criminals are the enemies of the state and of the people.””
Regarding the Ashes to Ashes report, BAT South Africa is not in a position to respond to this, as the report does not include South Africa in the list of countries analysed.
Simon Cleverly, Group Head of Corporate Affairs at British American Tobacco, said commented: “British American Tobacco plc is a global business which operates in over 200 markets around the world.
In all the markets in which we operate we fully comply with all applicable tax legislation. Across the periods (2007–2016) covered by the Tax Justice Network, we contributed £255bn to governments globally in excise, duty and corporation tax.
In 2018, the underlying effective corporate tax rate of the Group was 26.4% – well above the UK rate of 19%. Our stated tax strategy is to comply fully with all applicable legislation and regulations in the markets where we operate and for transactions between BAT and its subsidiaries to be carried out on terms similar to those which would be carried out between independent businesses.
Consequently, BAT does not accept that there is any avoidance or loss of tax to the countries referenced in the Tax Justice Network’s report, or in any market in which the Group operates.”
Cigarettes cost the world $1.4 trillion annually in healthcare costs and lost productivity.