DemToCo denies scheme to avoid tax from GRA- says group has contributed significantly to the economies of the countries in which it operates.

May 10, 2019 News

Demerara Tobacco Company (DemToCo) has refuted a report that it deliberately operated a scheme to reduce the amount of tax it should be paying.

DemToCo said it is willing to answer questions following a scathing report on how the profits are being creamed off.

According to DemToCo yesterday, BAT is a global company operating in some 200 markets worldwide.
DemToCo insisted that the group has been making significant impact on the economies of the countries it operates.
“Across the periods covered by the Tax Justice Network, from 2007-2016, the group contributed to £255bn in excise, duty and corporation tax to government globally.”
DemToCo stated that transactions between BAT and its subsidiaries reflect genuine costs that are frequently audited by external parties.
“Accordingly, DEMTOCO does not accept that there is any avoidance or loss of tax revenue to Guyana in the manner contended by the report. The Group is a significant tax contributor to governments worldwide and fully complies with the applicable tax legislation where it does business and operates all transactions that occur between group companies on an arm’s length basis at market rates.”
DemToCo said it is willing to answer any questions.
DemToCo is a subsidiary of British American Tobacco (BAT) and are the distributors of Pall Mall and Bristol brands of cigarettes.
A recent report listed Guyana and a number of other countries, including Trinidad and Tobago, where BAT benefitted from payments that reduced its profits and thus the amount of taxes it should have paid in the respective countries.
The Guyana Revenue Authority (GRA) recently said it is looking at allegations that BAT hid its profits from operations here.
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.”
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.
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 shareholders’ 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 percent ($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.