British American Tobacco is facing accusations of avoiding paying hundreds of millions of dollars’ worth of taxes. The accusations indicate that the company, frequently referred to as BAT, shifts profits to a United Kingdom subsidiary, effectively avoiding paying corporate tax in developing countries.
These accusations come from the Tax Justice Network. That organization estimates that BAT, which is based in London and the biggest tobacco company in the world, avoided and would avoid payment of around $700 million. Specifically, the Tax Justice Network indicates between now and the year 2030, BAT is on track to avoid paying taxes totally that amount in Indonesia, Bangladesh, Guyana, Kenya, Trinidad and Tobago, and Brazil.
These figures are not solely projections. In 2016 alone, the report indicates that BAT shifted about $941 million from various overseas companies and into BAT Holdings, its British subsidiary. This quantity represents approximately 12 percent of the company’s pre-tax profits. This resulted in lower corporate tax paid by British American Tobacco. Part of that reduced tax bill is due to the UK’s comparatively lower corporate tax of 19 percent, while many countries where BAT sells products have higher taxes. The extent of BAT’s tax avoidance is not known since the company has more than 100 offshore subsidiaries in 19 different tax havens with opaque financial data.
British American Tobacco let others know that the company was in full compliance with the tax legislation within its countries of operation. Additionally, no other organization, including the Tax Justice Network, has suggested that the methods BAT used to reduce taxes were illegal.
Despite the legality of the actions, the Tax Justice Network stated that the practices of BAT are in harsh contrast to the claims of the company, specifically that it provides taxes to middle- and low-income countries. According to BAT, there are 1.1 billion smokers worldwide with 80 percent in those countries.
What Else Tax Justice Network Said
In addition to the argument that BAT does not pay its fair share of taxes, most negatively impacting developing countries, the chief executive of the Tax Justice Network indicated other issues. He said that cigarettes already come with “massive human costs.” Adding the deprivation of taxes to countries that need it most for public funding onto the human cost of cigarettes, BAT’s actions take their toll on countries where the business operates. He specifically pointed to the fact that the funding from taxes could go to health services required to assist those who smoke.
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