DemToCo’s tax avoidance reports catch GRA’s eyes

May 09, 2019 News

The Guyana Revenue Authority (GRA) is looking at allegations that United Kingdom parent company of the Demerara Tobacco Company (DemToCo) hid its profits from operations here.

GRA’s Commissioner-General, Godfrey Statia

According to GRA’s Commissioner-General, Godfrey Statia, the issue has come to the attention of that tax body.
Statia, however, would only say: “We are checking the manner in which it can be done.”
DemToCo is the local distributor/subsidiary of British American Tobacco (BAT). It handles Bristol and the Pall Mall brands.
BAT, according to a recent report released by the watchdog tax body, Tax Justice Network, Dem ToCo had a scheme where it avoided paying millions of dollars in taxes from a number of countries including Guyana.
Between 2009 and 2012, an average of $200M in tax annually was avoided from Guyana, the watchdog body said.
DemToCo has not issued a statement since the story broke last week.
The report would come amid an ongoing debate of the country’s capacity to audit the accounts of foreign companies, especially with the coming of oil now.
Local companies have been complaining about the tightening of GRA, which has become stricter on tax compliance and procedures.
According to the report, Ashes to Ashes: How British American Tobacco Avoid Taxes In Low and Middle Income Countries, the company shifted more than half a dollar that would have been taxed locally to a UK subsidiary where BAT paid almost no tax.
Tax Justice Network estimates Guyana, Bangladesh, Indonesia, Kenya, Brazil and Trinidad and Tobago together stand to lose a total of nearly US$700 million in tax revenue by 2030 from the financial manoeuvring of just one tobacco company, if business continues as usual.
According to the report, BAT used payments disguised as royalties, fees and IT charges, to avoid paying around US$3.4M ($680M) between 2009-2012.
The watchdog body noted that the countries that it looked at also included Kenya, Trinidad and Tobago, Brazil, Indonesia and Bangladesh.
In total, BAT avoided paying US$58.2M between 2007 and 2016.
The Tax Justice Network also examined the cost of cigarettes on health and loss of productivity- what they said was the estimated economic cost of smoking- including health and low productivity costs due to early mortality and morbidity.
In Guyana, 17.4 percent of men were using tobacco daily.
The percentage of women over 15 years using tobacco daily was 2.3.
The percentage of deaths caused by tobacco in men is 11.4 percent as against 4.7 percent for women.
However, the worrying part, according to the report, is the estimated economic cost of smoking. It is US$15M.
In the report published on the heels of BAT’s annual shareholder meeting in London, the Tax Justice Network revealed a range of mechanisms used by the tobacco company in 2016 to shift income equivalent to over 12 per cent ($941 million) of its pre-tax profits to BAT Holdings Ltd, a UK-based subsidiary where BAT paid almost no corporate income tax.
By charging itself royalties, rerouting loans through tax havens and paying interests fees on loans made between regional offices, BAT shrunk its tax contributions in low and middle income countries where public funding is high in need and short in availability, according to the Tax Justice report.

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