Profits stashed in tax havens

AT LEAST 21 South African mining companies have a total of 117 subsidiaries in tax havens across,Picture: Flickr

AT LEAST 21 South African mining companies have a total of 117 subsidiaries in tax havens across the world, a research firm claims.

The SA Catholic Bishops Conference (SACBC) has written to the companies asking them to justify the existence of these tax avoidance bolt holes. The research, conducted for the SACBC Justice and Peace Commission, shows that the companies, which include Anglo American, AngloGold Ashanti, Impala Platinum, Lonmin and Petra Diamonds, all have subsidiaries in tax havens, also known as secrecy jurisdictions. These include the British Virgin Islands, Cayman Islands, Mauritius, the Netherlands and Bermuda.

The SACBC posed questions to Anglo America, Petra Diamonds, Bushveld Minerals and Central Rand Gold and highlighted that the companies were not accused of illegalities but believed it was important to explain why they used tax havens and the roles of these subsidiary companies.

“How many employees does each subsidiary employ in the country where it is incorporated? What tax advantages does the company receive by having subsidiaries in these tax havens?” the SACBC asked. It insisted that tax avoidance – as opposed to tax evasion which is illegal – and tax havens present major problems to governments which struggle with poverty, joblessness and inequality.

While they keep on the right side of the law, these companies are seen to be “cheating” the fiscus out of millions that could be used for public spending. Globally, tax avoidance by multinational companies amounts to an estimated $500bn (R7 trillion). The recent Panama Papers scandal illustrated how wealthy individuals and companies had taken advantage of secrecy jurisdictions and managed to keep their financial affairs relatively private and to avoid paying tax.

Gabriel Zucman at the London School of Economics said that in 2014 rich Africans were holding a massive $500bn in tax havens, which amounted to 30% of all Africa’s financial wealth. The fact that this wealth is untaxed meant that African elites have stolen at least $15bn, Zucman said. The SACBC said in its open letter to the mining companies that the controversial issue is whether tax havens should be allowed at all. International negotiations among governments were unable to agree a comprehensive list of “blacklisted” countries.

The organisation clarified that its letter was not accusing companies of illegality, but said the use of tax havens meant they were engaged in tax avoidance. “The risk that some companies may engage in tax avoidance is heightened by their use of tax havens and the inability of outsiders to scrutinise their tax affairs adequately. “Some individuals and companies use tax havens illegally purely to evade tax. This usually involves creating shell or ‘letterbox’ companies with no economic activity in order to hide profits and benefit from lower tax rates than in their true home jurisdictions,” the organisation said.

Anglo American spokesperson Sibusiso Tshabalala said yesterday: “We do still have a small number of companies in our group which are registered in tax haven jurisdictions. These are the result of legacy structures and the jurisdiction of the companies is overridden by our policy of having them be resident in the UK for tax purposes.

“The use of tax havens plays no part in the management of our taxes, and we are well advanced in liquidating these legacy entities.” The New Age attempted to elicit comment from several of the other companies named, as well as trade unions and other NGOs but none had replied by late afternoon.

The Chamber of Mines said yesterday it was not privy to the structures that individual companies have in place. “All chamber members have signed the membership compact which states, among other things, that they will implement and maintain ethical business practices and sound systems of corporate governance,”

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