Tobacco giant accused of 'financial maneuvering' over tax

Developing nations, including Bangladesh, Brazil, Guyana, Indonesia, Kenya, and Trinidad and Tobago, could be missing out on tax income worth hundreds of millions of dollars because of the practices of London-based British American Tobacco, according to Tax Justice Network.

The organization, which has been campaigning since 2003 for global tax fairness and an end to tax loopholes, claims the company that is also known as BAT used "financial maneuvering" to move profits from overseas subsidiaries to a UK branch, something it says resulted in the group paying less tax.

The network's report, Ashes to Ashes, claims BAT, which is one of the world's largest tobacco companies and the maker of brands including Dunhill, Lucky Strike, Kent, Pall Mall, Benson & Hedges, and Rothmans, will not pay $700 million in tax between now and 2030 because of its practices.

The company is conducting business within the rules and there is no suggestion it has done anything unlawful. However, Tax Justice Network is calling for change.

Alex Cobham, chief executive of the group, said: "Cigarettes not only impose massive human costs, those who profit from them are actively depriving lower-income countries of the public funding they need to provide people with health services. At a minimum, governments must require tobacco companies to publish country by country reporting to make sure profits are taxed in the communities where they were raised, not in the tax havens they were siphoned off to."

The report claims that, in 2016 alone, BAT shifted $941 million – around 12 percent of its pre-tax profit that year – from overseas companies to a British subsidiary called BAT Holdings. The network says the transfer meant the company paid corporation tax in the UK at 19 percent, instead of at a higher rate elsewhere.

A spokesman for BAT told the Guardian newspaper the company "does not accept that there is any avoidance or loss of tax to the countries concerned in the manner contended by the report".

"The group fully complies with all applicable tax legislation where it does business, operates the transactions that occur between group companies on an arm's length basis, and is a significant tax contributor to governments worldwide," the spokesperson said. BAT also notes transactions between companies within the group are subject to frequent external scrutiny.

The Tax Justice Network says BAT takes money from overseas subsidiaries in a variety of ways, including through royalties,loan charges, technical and advisory fees, and IT charges. The 62-page report says BAT has more than 100 offshore subsidiaries in 19 "tax havens" and contends overseas subsidiaries pay hundreds of millions of dollars a year in unexplained "other operating charges", which, it says,means they are not subject to full taxation.