Action Aid has published a report on tax avoidance by Associated British Foods (thew owners of Primark) in Zambia in association with the Observer this morning.
Of course no one is saying anyone is doing anything illegal.
And ABF say it's all down to allowances they legally enjoy.
But, how come the allowances they legally enjoy mean that no tax is paid. It comes back to that question of who writes the rules. That comes back to Margaret Hodge asking the Big 4 why they have undue influence, an influence that means poor people lose out around the world.
For asking that question a Church of England lay minister called her a prat. So much for a 'bias to the poor'.
Well I'm proud to have that bias to the poor. And I applaud Action Aid for sharing it.
Sure, Associated British Foods have done nothing wrong. It has just played the rules that are completely biased in its favour.
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The key point seems to be that no tax is paid *yet*. If it’s capital allowances, then when the deferred tax reverses the taxable profits will exceed accounting profits.
The preferential 10% rate will soften things, of course, and it may be that the DT won’t reverse if they keep investing. But then continued investment may be a good thing for Zambia overall – I don’t know, economics isn’t my area.
The other point is that this is following the rules, but the basis for the rules has been called into question. Some commentary suggests that Zambia has somehow been forced into tax treaties that have no WHT on them, like the Irish one. I’m not sure how that happens, just as I’m not sure how Zambia is forced to grant a 10% rate rather than the full rate (maybe the lawmakers weren’t careful enough when defining “farming”?). Is it accident, incompetence or conspiracy?
I tend to assume that accident is more likely than incompetence, which is more likely than consipracy, but I know others would disagree.