Campaign blog

Insight, debate and campaigning news from ActionAid

New evidence piles pressure on Vedanta over tax dodging in Zambia

Ema Jackson's picture Posted by Ema JacksonCampaigns Assistant
 

New evidence has just emerged that shows that the huge UK mining company, Vedanta, has been shifting profits out of its Zambian copper mining division into the tax haven of Dubai.

Campaigners in Zambia protest Vedanta.
Campaigners in Zambia protest Vedanta.
Photo: Andrew Masiye, ActionAid

Using a tax haven?  

A Zambian Audit Committee report states: "Copper was being sold by KCM (the Zambian copper mine owned by Vedanta) to Fujairah Gold, a subsidiary of Vedanta in Dubai in such a way as to result in an under-pricing of metal sold."

This under-pricing of copper means that Vedanta could shift its profits out of its Zambian subsidiary, paying less corporation tax there, and into its subsidiary in Dubai, where it would pay no corporation tax on those profits.

This damning evidence, uncovered by a recent UK court case, supports claims from ActionAid campaigners in Zambia that Vedanta has been dodging taxes there. ActionAid understands that Vedanta disputes the accuracy of the GTAC report. 

Patrick Nshindano, ActionAid Zambia Campaigner said: "People here are outraged; it is all over the media. Vedanta needs to prove to the Zambian people that it is not tax dodging and depriving the country of vital revenue that could be spent on desperately needed public services."

A leaked video of Vedanta boss 

This new instalment comes only weeks after a leaked video revealed Anil Agarwal, boss of Vedanta, bragging about the billions in profit they make in Zambia – in stark contrast to the very little tax it pays there. Anil Agarwal has still not explained himself or apologised for the video, even after it caused a storm with protesters taking to the streets in Zambia and thousands of UK campaigners emailing him to demand he comes clean.

So it seems the evidence just keeps stacking up against Vedanta and this new revelation is just one more piece in the puzzle. However, the company now has to come clean on its entire global tax affairs. Only with this global picture can we make sure Vedanta pays its fair share of taxes in one of the world's poorest countries.

Europe and tax transparency: don’t put the critics in the driving seat

As our Tax Justice campaign goes from strength to strength, the UK Government has agreed that country by country reporting is vital for developing countries to hold foreign tax dodging companies to account. ActionAid UK's Policy Team investigates Europe's progress.

ActionAid activists from around the UK protesting outside the Barclays AGM to demand that Barclays stop helping businesses set up in tax havens
ActionAid activists from around the UK protesting outside the Barclays AGM to demand that Barclays stop helping businesses set up in tax havens
Photo: Matt Alexander/Press Association

The European Commission is running into criticism from NGOs, including ActionAid, for awarding the job of assessing the impact of country-by-country tax reporting by banks to the accounting firm Pricewaterhouse Coopers (PwC), which has declared in public that it opposes this kind of reporting.

This issue matters because citizens in developed and developing countries alike won’t trust the international tax system without a much clearer sense of where multinational companies are making their profits and paying their taxes, and how much tax they are paying.

The European Union has already decided that banks must report their turnover, profits and taxes by country. The assessment is meant to decide whether these reports should be made public or not. Since PwC has made clear that it thinks they shouldn’t be, the firm is clearly an inappropriate choice to carry out the assessment and should withdraw at once.

As it happens, Barclays Bank has voluntarily released such a report this week, saying that it wants to engage with its stakeholders “on an informed basis”. The report is significant because, whatever PWC may think, a very large European bank has shown that it not only can publish this information but evidently thinks it’s a good idea to do so.

Barclays’ new report shows big profits in tax havens

What Barclays has published is a breakdown by country of its turnover, pre-tax profits and taxes paid in 2013, plus the number of people it employs in each country. The report underlines the point that transparency is essential to understanding big companies’ tax arrangements, provided the right kinds of information are published. But it also shows why more disclosure can only be a first step towards addressing problems which have brought the global tax system into disrepute.

Among other things, the figures show that in 2013, Barclays reported 27% of its worldwide pre-tax profit in tax havens, almost all of it in Luxembourg and Jersey. The corporate income taxes which the bank paid in these places would only amount to 2.2 per cent of this profit (see important footnote below).  By way of comparison, the headline rate of corporate tax in the UK is 21%.

We aren’t drawing any conclusions here as to what these figures might say about Barclays’ tax arrangements: there are a number of possible explanations for them, none of which would imply any wrongdoing by the bank. What the figures clearly do, however, is to give detail and specificity to the general point that tax havens are very important to the profitability of big banks. That’s why the evaluation of the pros and cons of publishing such reports can’t be left to those who oppose the very idea.

Transparency and beyond

But the figures also underline the point that transparency often poses questions rather than answering them. Should a bank be able to book more than a billion pounds in pre-tax profit in a jurisdiction where it only employs fourteen people, like Barclays does in Luxembourg? And if not, then what should be done about it? The answer to that question takes us beyond transparency and into a much deeper debate about the large and often harmful effects that one country’s tax rules can have on others.

Find out more: Read our FAQs on our Tax Justice campaign

 

Important footnote: Barclays reported pre-tax profits totalling £2,464 billion for Luxembourg, Jersey, Switzerland, the Isle of Man, Monaco, Mauritius and Guernsey in 2013 and paid total corporation taxes of £53 million in these jurisdictions. Total pre-tax profits reported by country, before deduction of intra-group eliminations, dividends, recharges, asset transfers, hedging and other items, were £9.081 billion. Barclays points out that taxes are often paid over multiple years, so there may not be an exact equivalence between the pre-tax profits reported in a given year and the amount of tax actually paid in that year.

Tax dodging and The Birth of Empire

Ruth Kelly's picture Posted by Ruth KellyInternational Tax Justice Policy & Campaigns Advisor
 

I’ve always thought that the East India Company might tell us something about how the global tax system works. Watching Dan Snow’s recent BBC programmes, The Birth of Empire, made me realise that the Company had an even more active role in the tax system than I had imagined.

The story of the Company is a mix of fabrics and famine; corruption and colonialism; trade and taxes. When they first arrived in India, East India Company employees were customs-tax-paying traders like any other. Mughal emperors allowed them to set up factories and trading posts in tiny settlements that would later become Madras, Bombay and Calcutta. In return, the emperors got access to lucrative British export markets.

 

Campaign ships calling for an end to tax dodgingCampaigners call for an end to tax dodging

East India Company as Tax Collectors

The early eighteenth century was a time of change. In 1717, the then emperor waived customs duties for Company trade. But by that point, the empire was disintegrating and regional rulers were becoming more powerful.

Decades of contested power and Anglo-French conflict followed before the East India Company won Bengal for Britain in 1765. In a dramatic shift, Company employees suddenly assumed the role of tax collectors for Bengal and later for most of the rest of India. As hopeless as they were at playing this role, the revenue they did manage to collect doubled the value of East India Company shares.

The origins of modern tax law

By the twentieth century, the East India Company's military exploits had brought it to near-bankruptcy and it had long stopped trading. But it remained one of the first and most iconic multilateral corporations. The way the Company operated must have influenced WWI Allies as they developed rules for taxing companies doing business in more than one country.

If tax is conceived as a way of paying for public goods and redistributing wealth, the current international system doesn’t make a lot of sense. If it is understood as a way of funding colonial expansion, it all begins to fall into place.

The East India Company’s monopoly over trade with the East Indies was originally granted because it could loan the Crown large sums of money to pay for colonial wars. Later, its monopoly position was tolerated because of the customs income its trade brought in. Over the years, the Company paid varying amounts of tax to the British authorities. But the notion that it should also pay tax in Company-controlled British India would have been nonsensical.

These days, most individuals and domestic companies pay most of their income tax to the governments that provide the services they use. This doesn't hold for companies operating in more than one country.

Rather than paying taxes to help fund the infrastructure and services they use to help them make money, multinationals pay most of their corporate income tax wherever they originally come from. Countries usually agree to divvy up taxing rights, allowing the host country to levy tax on some proportion of multinational profits. But the underlying assumption behind those agreements is that any tax revenue they don’t agree to share is collected by the multinational's country of origin.

The impact on the global South

Foreign investment has enormous potential, if Southern governments can put in place infrastructure and services to make it work for their citizens. It seems ridiculous that the current international tax system leaves them without the resources they need to make that investment. But if we adopt a colonial worldview, it makes perfect sense that multinationals pay most tax to the country whose flag they fly.

Beautiful clothes, ugly reality: Cambodia’s women garment workers demand decent work and dignity from big brands

Rachel Noble's picture Posted by Rachel NobleWomen's Rights Research Officer & Policy Adviser
 

Life inside Cambodia textiles factories has been in the spotlight since 40 garment workers were shot at a protest in January (five of them fatally). So what happens when the people who make our clothes, get dressed up in the items they produce – and demand their rights? ActionAid UK's Rachel Noble visited Cambodia's capital to find out.

Garment workers taking to the catwalk in fashion show protest of their low pay and working conditions
Garment workers taking to the catwalk in fashion show protest of their low pay and working conditions
Photo: Savann Oeurm ActionAid Cambodia

Pumping music, flashing lights, exquisitely made-up women in killer heels strutting down the catwalk: but these weren’t models donning the latest haute couture, but workers from some of Phnom Penh’s 330 export garment factories in the clothes they produce for global high-street brands.

The event, Beautiful clothes: Ugly Reality, was organised by ActionAid Cambodia’s local Safe Cities programme partner, Workers Information Centre (WIC). It sent a powerful message directly from the workers - 80 to 90% of whom are women - to the Cambodian government and the multibillion dollar brands, that their exploitation has got to stop.

Their demands, displayed on placards paraded by the women and voiced in a subsequent Q&A with the media, include raising the monthly minimum wage to $160 (£95.44) to afford them a decent and dignified standard of living, and an end to the short-term contracts that deny women maternity leave and expose them to effective dismissal if they fall pregnant.

Other demands include an end to forced overtime; to be treated with respect and not subjected to violence; opportunities for higher education.

They have also demanded 'rice not bullets', a slogan referring to the poor nutritional status of women workers, who often cannot afford sufficient food because of their low pay. This, combined with the long hours in stifling, cramped conditions, has led to mass faintings and a range of health issues, while the privatised healthcare system means treatment is often beyond reach. 

Garment workers campaigning against dangerous working conditionsGarment workers campaigning against dangerous working conditions

It is also a call to the government to lift the ban on public gatherings and to end its brutality against civilians, not least since 40 workers were shot by security forces, five of them fatally, during strikes over poor pay in the garment sector in January 2014.  

Twenty-three male workers were detained and released 5 months later, on 30 May, on suspended sentences following a trial that was decried as a sham by the Cambodian Centre for Human Rights.

Poor living conditions

Indeed, the lives of Phnom Penh’s women garment workers are a far cry from the glamour of the catwalk or the image of a ‘cool, carefree lifestyle’ the big brands seek to convey. Mostly young migrants from poor rural areas, these women struggle to cover their basic living costs on the current $100 (£59.65) monthly minimum wage, forcing them to work excessive overtime up to six days a week.

Such abysmal wages leave them no choice but to rent tiny rooms, often shared with 10-15 others. Access to water, sanitation, electricity, healthcare, or education for their children is limited. Transport links to the factories are poor, especially late at night. Returning home on foot after dark along poorly lit streets means they often face violence and harassment.

Concerned about their brand image following the shocking events of January, along with supply disruptions from repeated strikes, have prompted 30 of the major brands to join up with international trade union federations, such as IndustriALL, to condemn the violence and call for the release of the demonstrators

Cambodia's garment workers demand decent work and dignity from big brands Cambodia's garment workers demand decent work and dignity from big brands

They have also engaged in talks with the government about raising the minimum wage, with initial reports indicating they would support an increase.  Garments and footwear account for a staggering 80% of Cambodia’s exports, with shipments to the US and EU – its biggest markets  - valued at £4.1 billion in 2013. This gives the brands immense power and leverage in influencing such decisions.

Women workers demanding change

While it is positive and encouraging to see the brands responding in this way, the power they wield is, of course, a huge part of the problem. The constant downward pressure they exert on prices paid to the factories for vast clothing volumes in a context of fierce competition between South Asia’s garment exporting countries - many of which have dismal records for human rights and gender discrimination - inevitably leads to a race to the bottom in terms of wages and working conditions for these female-dominated sectors. 

So while brand profits and CEO salaries soar, the business model these companies follow - enabled by the weak regulations and free trade policies pushed by richer governments and multilateral donor agencies - serves to further entrench the economic inequality already endured by poor women in Cambodia and other developing countries.

Garment workers campaigning for decent working contitions and a living wage

However, as the WIC fashion show and wider events in Cambodia show, women and men are increasingly standing up to this exploitation, while engendering a clear vision of a more equitable future. A statement issued by the garment workers at the event read:

“We believe that our unity of our struggle is the key battle against the oppressors and [will] create a better economic model which is a more equitable distribution of wealth… Our unity will create a better path and society so that our children and our children’s children may be free from oppression, exploitation and inhumane treatment”.

Operation Second Thanks - inspiring activism from The Yes Men

Natasha Adams's picture Posted by Natasha AdamsActivism Officer
 

A room full of contractors, lobbyists & officials doing a "celebratory circle dance" for renewable energy. Sounds pretty unlikely? Its the latest stunt from activist pranksters The Yes Men - creative activism at it's best. 

"Benedict Waterman" & "Bana Slowhorse" dance with officials celebrating renewable energy
"Benedict Waterman" & "Bana Slowhorse" dance with security contractors
Photo: The Yes Men

If you haven't heard of The Yes Men you should definitely check them out. Headed by 'Mike Bonano' & 'Andy Bichlbaum' they're a loose knit global network of 'identity correcting' activists. They impersonate entities they dislike, like corporates & decision making bodies, often starting with a spoof website. When hapless researchers mistake their spoof websites for the real thing and invite them for media interviews or to speak at conferences, the Yes Men are happy to oblige. 

Operation Second Thanks

This latest stunt started with "Benedict Waterman", posing as an official from the US Department of Energy, announcing a revolutionary new energy plan to transition the US grid to 100% renewable energy by 2030, and giving ownerhip of this energy to Native American nations (as reparations for genocide).

Waterman was followed by a speech from "Bana Slowhorse" claiming to be from the Bureau of Indian Affairs (actually Gitz Crazyboy, a youth worker from the Athabascan Chippewyan First Nations, whose land includes the Alberta Tar Sands). 

Then they got them to dance!

The audience attending the Homeland Security Conference at which they were speaking included a retired Navy Admiral, an aspiring Republican Congressman, lobbyists and security contractors. These people not only loudly applaued the speeches - they joined in with a "traditional" circle dance to celebrate sustainable energy. And they got many of the audience wearing 'native headbands' with little windmills decorated with the American flag stuck in them. Amazing.

Want to know more about The Yes Men?

The Yes Men have released two films of their excellent activist stunts and pranks, and they're currently finishing their third: 'The Yes Men Are Revolting', which will feature Operation Second Thanks. They've also created the Yes Lab which is developing an Action Switchboard to help progressive organisations develop creative actions all over the world.

Activism doesn't have to be dry 

There are loads of creative ways to make your point, create awareness, get media attention and push for change. ActionAid isn't involved with The Yes Men in any way, and obviously we campaign on different things - we've just been inspired by their work. We're already trying out some new ideas with our tax justice walking tour Show me the Money. To share inspiration and bring more creativity into UK activism at ActionAid and beyond, we're hosting an event to discuss performance and activism in our London office. We'll have speakers, films & plenty of time to share ideas:

>> Join us for an evening of Activism and Performance: 
Tuesday June 24th 6:30 - 8:30pm in the ActionAid London office

Photo: The Yes Men

Tags: activism

Is mining giant Vedanta dodging taxes in Zambia?

Murray Worthy's picture Posted by Murray WorthyTax Justice Campaign Manager
 

Today, over 200 activists from ActionAid Zambia are staging a march to the offices of copper mining company KCM, owned by the UK-listed mining giant Vedanta, in protest over allegations of tax dodging by the company.

ActionAid Zambia demonstration against KCM
ActionAid Zambia demonstration against KCM
Photo: ActionAid

They’re demanding the company comes clean on the profits it makes in Zambia and are calling on the government to audit the company’s operations and recover any unpaid taxes.

The controversy in Zambia erupted after a video of Vedanta’s Executive Chairman Anil Agarwal was released on YouTube, apparently bragging to a trade conference about the huge profits Vedanta makes from the KCM mine.

In the video, Agarwal said “We took over the company. It's been 9 years, and since then, every year it is giving us a minimum of US$500 million plus US$1 billion every year… it has been continuously giving back.”

The Executive Chairman’s comments stand in sharp contrast to Vedanta’s own claims that KCM was making only a minimal profit.

If Agarwal’s claims of KCM’s profitability are true it would appear the company has either been hiding its true profits from the Zambian Revenue Authority or shifting them out of the country, avoiding potentially huge sums in tax.

Vedanta have since claimed that Agarwal’s comments were taken “out of context” and that “nearly all the returns from KCM have been reinvested back into KCM”, though the company’s statement made no mention of the company’s profitability or tax payments.

The Zambian Revenue Authority has started an investigation, but ActionAid Zambia is calling on the government to go further and carry out a forensic audit of the company. ActionAid is also demanding that Vedanta publicly provide information on their operations and profits. This transparency is vital to reveal whether Agarwal’s claims are true and whether the Zambian government needs to act to recover unpaid taxes from the company

Take action in solidarity with ActionAid Zambia now

Tweet at Vedanta’s Executive Chairman Anil Agarwal demanding the company comes clean on its Zambian profits and whether it has been dodging taxes on one of the world’s poorest countries.

Tweet