Thursday, 14 February 2013

Sugar, Sugar….

When we drive to Lusaka, about 6 hours after leaving Mwandi, we pass through Mazabuka, about 140km away from Lusaka. Mazabuka is the sweetest town in Zambia, according to the billboards advertising the Zambia Sugar’s plantation, where most of Zambia’s sugar is grown and for Associated British Food shareholders it is indeed a sweet place!

The Guardian (link: k/business/2013/feb/09/british-sugar-giant-tax-scandal) has revealed that the multi-national, FTSE 100 company, Associated British Foods that produces Silver Spoon Sugar, Twinnings Tea and Kingsmill Bread is avoiding paying tax in Zambia by remitting most of their profit abroad. Zambia Sugar (Illovo), is the local subsidiary here. A report from ActionAid “Tax Justice” reveals that Zambian Sugar boasted it paid virtually no corporation tax to the Zambian Revenue Authority, it actually paid less than 0.5% of its $123m pre-tax profits in corporation tax between 2007 and 2012. Zambia Sugar, however, has recently posted record pre-tax profits and its plantation has doubled its capacity over the same period to produce sugar for markets in Europe and Africa.

The company benefits from capital allowance and tax-relief schemes in Zambia, but still, almost one third of its pre-tax profits are remitted to Ireland, Mauritius and the Netherlands. There are sister companies in these tax havens, some with no employees, which means the ZRA cannot even charge their normal tax on money leaving the country. These allowances and tax-relief schemes were granted to it by the ZRA to finance its expansion. They even obtained one by taking the Zambian government to court. Apparently, according to the firm, these payments made to overseas companies, are largely for ‘historical reasons’, (read neo-colonialism) and are not driven by tax considerations.

Ironically, it is estimated that this form of tax avoidance in Zambia amounts to a sum 14 times larger than that which the UK provided in aid to Zambia to combat hunger and improve food security. 45% of Zambian children suffer from chronic malnutrition. Globally, the total loss to Treasuries in the less developed world through tax avoidance by multinationals in is estimated to be around GBP70bn a year. This, if targeted properly, it is reckoned, could save the lives annually of 85,000 children under the age of five in the world’s poorest countries. .And yet, Associated British Foods have gone to great lengths to ensure it pays virtually no corporation tax in an impoverished country. There are also other transactions done that reduce Zambia Sugar’s taxable profit and other taxes that are usually paid to the ZRA on payments made abroad.

Of course, the Company denies it doing anything illegal or immoral by reducing the tax it is due to the Zambian government. It claims GBP150m has been invested and 5000 jobs created and the allowances on this investment mean no company tax is due. They say they are merely enjoying the tax-holiday designed to attract investors!

God’s principles concerning fair trade, fair dealing and right relationships are clear in this situation. The Old Testament Law demands that justice is seen to be done and the rights of the poor are safe-guarded to prevent a downward spiral of poverty. Amos clearly condemns the use of dishonest scales, skimping measures or selling sweepings as wheat.

This is another clear case of the world trading system working for the rich and powerful. Associated British Food through Zambia Sugar has almost a monopoly in the Zambian sugar market and is able to call the tune to the disadvantage of the ZRA and Zambian Government.

In the story of Lazarus, the rich man is condemned because he did nothing to change the situation. Jesus condemns exploitative and uncaring relationships between the rich and the poor. James too highlights the luxury and self-indulgence of the rich at the expense of the poor and suggests that we should treat others in the way we would want God to treat us.

This is an unjust situation which is causing oppression and is giving an unfair advantage to a special group. The present Zambia Sugar Trading Organisation needs recreation and transformation in order to be a system that deals fairly with others and encourages right relationships.

Road Carnage

Zambia has just experienced one of its worst road traffic accidents ever. On Thursday morning 51 passengers aboard a Post Services Bus, travelling from Ndola to Lusaka were killed on the spot in a horrific head-on collision at Chibombo about an hour’s drive North of Lusaka, when the bus and a truck hit each other. Three days of national mourning have been declared and the Council of Churches in Zambia (CCZ) says the church will hold prayers for the wellbeing of the nation because Zambia cannot afford to distance itself from God.

CCZ general secretary Suzanne Matale said the country needed prayers in such hard and trying moments and needed God’s intervention now more than ever before. It was important for all churches in the country to pray for the nation and especially for the families who have lost loved ones in these tragic circumstances.

1 comment:

  1. Bit slow to catch up on this one, I'm afraid.
    Tax avoidance on this scale is terrifying. Of course Zambia is not alone, it happens not only throughout the developing economies, but has been much in the UK news too, where Starbucks, Amazon and others make huge profits, but export the tax liability.

    It's clear that national governments no longer rule the nations, which are completely in hock to multinational companies and financiers. National fiscal melt-downs are one consequence.

    In material terms, I am not hopeful for the years ahead of us. Thank God that our hope is elsewhere.