This was the issue that perturbed the Honourable Member of UK Parliament for Monmouth, Hon. David Davies, as demonstrated in his article, “Are multinationals in Ghana really paying less in tax than market traders?” This article was published on 2nd May, 2012 in “The Commentator”, a UK based newspaper. The Honourable MP was surprised that ActionAid estimated that market women were paying more income taxes than Accra Brewery Company – a subsidiary of SABMiller. The MP did the right thing by contacting SABMiller to clarify the issue. SABMiller's answer unfortunately convinced the MP to accept that SABMiller can omit to pay corporate income taxes as long as it pays excise duty and VAT – which are taxes borne by consumers.
Yes, indeed some multinationals in Ghana are paying less tax than they are supposed to pay – some even pay nothing at all. In 2010, ActionAid confirm that SABMiller did not pay corporate tax for three years between 2005 and 2010. SABMiller has not denied this. ActionAid, in its 2010 report “Calling Time; Why SABMiller should stop dodging taxes in Africa” established that SABMiller used unethical means to shift profits from Ghana to tax havens. This helped the Accra Brewery company to avoid taxes of about GHS 1.2million annually. In fact SABMiller's tax management practices contradict its own assertion that tax payment is one of the greatest contributions business can make to development.
Unfortunately, SABMiller continues to justify its unethical tax practices with the amount of indirect taxes it pays to the government of Ghana as its tax contribution hence its unacceptable tax practices should not be questioned. In fact all other companies who genuinely pay corporate income tax also pay excise duty, VAT and other taxes as prescribed by law. There is actually no provision in the Ghanaian tax law that exempts companies from corporate income tax where they pay other taxes to government. Corporate income tax serves a completely different purpose from all the taxes that SABMiller is using as justification for manipulating its procedures to dodge taxation.
Taxes such as excise duty and VAT are chargeable to the cost of production so companies who pay such taxes are only intermediaries – the final burden of taxation rests on the consumer, depending on the elasticity of demand. For the brewery sector in Ghana it is clear that the consumer bears the burden of taxation in full. So SABMiller cannot claim to be responsible for payment of such taxes and use it as a justification for its tax dodging scheme. SABMiller should rather explain if the four counts of unethical practice levelled against it were incorrect.
Beyond a deliberate attempt to dodge payment of corporate income tax, is there any reason why SABMiller should register brands that were developed by its African subsidiaries in yet another subsidiary in Europe, when these brands were developed before SABMiller even bought shares in the African companies? Apart from tax dodging is there any commercial advantage for establishing a subsidiary in a tax haven to be responsible for procurement, when the staff in this office are mostly on 'on the job' training? Can SABMiller explain why it granted credit to Accra Brewery to a tune far more than the limits allowable under the Ghana tax law?
SABMiller's practices do not reflect its statement that it believes in sustainable development. It rather infringes on genuine efforts that developing countries are making to improve the welfare of their citizens. The tax revenue loss from these unethical actions is only a fragment of the problems that multinationals involved in these acts are inflicting on developing nations. SABMiller's case is more problematic because of the kinds of products it offers.
Tax policies on alcoholic beverages have both revenue and a public health policy dimension. Alcohol consumption is associated with adverse social effects such as accidents, low worker productivity, domestic and workplace behavioural challenges, and an increased health bill. Governments need tax revenue to help address these negative impacts. If companies such as SABMiller which are directly involved in the production of alcohol, and regularly awarding consumers for their increased consumption, do not pay tax, with what revenue would governments address the negative impact associated with alcohol consumption? Is it fair for SABMiller to dodge taxes for governments to look for money elsewhere to clear the mess created out of consumption of their products? Does SABMiller believe in sustainable development, and then frown at tax justice?
ActionAid's message to the corporate world to pay taxes in relation to their true income is not new. The first maxim of taxation requires entities to pay taxes in proportion to amount of protection they receive from the state. In other words, those who earn more income must pay more taxes. This is because taxation weighs differently and often to the disadvantage of the poor tax payer and perpetuate their poverty. Therefore any tax system that do not address the income disparity is not a just tax system because it perpetuate poverty. Similarly any acts from individuals or group that undermine government's efforts to create a just tax system are also acting to perpetuate poverty, and this should not be encouraged.
So if SABMiller and other multinational enterprises use tax avoidable schemes to manipulate their earnings to enable them pay no tax and the market trader earning such an insignificant amount pays tax, is it unfair to demand that multinationals should amend their practices and pay full and fair tax?
It is important to note also that distortions in financial information for the purposes of tax dodging significantly affect effectiveness and efficiency of government policy decisions. Accuracy of information is vital to develop policies that help in addressing poverty. The private sector has been hailed as the engine of growth for many developing countries. Accuracy of business information, especially financial information is vital for entrepreneurial development in developing countries. Multinationals publishing false losses are therefore discouraging private sector investment and entrepreneurial development.
Unfortunately most of these multinational enterprises have minority shareholders who do not benefit from the false losses reported by these companies. In Ghana, the Social Security and National Insurance Trust (SSNIT), - the institute charged with responsibility to manage pensions of formal sector employees - invested workers' pension in Accra Brewery. For all the periods that SABMiller shifted profits from Ghana and for which no dividends were paid, workers' pensions invested in the company's subsidiary in Ghana yielded no returns for Ghanaian workers. Ghanaian investors who have shares in the company also received no dividends on their investment. SABMiller then quickly delisted from the stock exchange to enable it perpetuate this unacceptable practice in the dark.
Ghanaians who believe in tax justice are very happy with the ActionAid report on SABMiller. In fact it enkindled the Ghana government's efforts to institute regulations to curb transfer pricing and allied tax dodging schemes of multinational corporations.
ActionAid Ghana is not a commercial entity and therefore does not make profit for which corporate income tax could be levied. However, as a responsible organisation, ActionAid Ghana complies with the Ghana Internal Revenue Act and subjects itself to tax audits as and when it is demanded. In the last 5 years, ActionAid Ghana has received two tax audits and the last audit that was conducted in 2011, the Ghana Revenue Authority commended ActionAid Ghana for its efficient tax practices.
ActionAid Ghana partners with a number of nongovernmental and community based organisations. Tax compliance is among the numerous financial management capacity building programmes ActionAid provides to these partners.
ActionAid believes in the fundamental human rights of people and also believe that their access to economic resources is a human rights issue. ActionAid is against acts that perpetuate poverty and deny people their freedom to enjoy their rights. Tax injustice perpetuate poverty and must end.