British American Tobacco Bangladesh is systematically shifting income out of Bangladesh to avoid paying the full corporate income tax in Bangladesh according to a new analysis published by the Tax Justice Network. Cigarettes cost the world $1.4 trillion annually in healthcare costs and lost productivity, making British American Tobacco Bangladesh’s accounting gymnastics to avoid paying taxes needed to fund healthcare and other essential services all the more reprehensible. Any argument that British American Tobacco Bangladesh strengthens the nations’ economy falls flat when the company goes to such lengths to avoid paying its fair share of taxes.
According to the report, in 2016 British American Tobacco Bangladesh lowered its tax contributions by nearly US $6 million after it shifted approximately 14.8 percent of its pre-tax income (US $21 million) to the United Kingdom through royalties, fees and IT charges. The $6 million tax loss in Bangladesh would have been enough to fund the per capita health expenditures of over 170,000 Bangladesh citizens for a whole year
The analysis found this behavior in Bangladesh and every other country it examined. In total, for every dollar the parent company, British American Tobacco (BAT), paid in tax in the countries where it operates, the giant tobacco multinational shifted more than half a dollar that would have been taxed locally to a subsidiary located in the U.K. where BAT paid almost no tax. The analysis estimates Bangladesh, Indonesia, Kenya, Guyana, Brazil and Trinidad and Tobago together stand to lose a total of nearly $700 million in tax revenue by 2030 from the financial maneuverings of BAT if business continues as usual.
Tobacco use imposes massive social and economic costs, especially in low- and middle- income countries where 80 percent of the world’s smokers live, yet BAT is going to great lengths to pay far less than countries’ tax codes call for. In 2016, BAT shifted over 12 percent of the company’s global pre-tax income – $941 million – to just one subsidiary that is based in the U.K., where BAT paid almost no tax. This is just the tip of the iceberg for a company with over 100 offshore subsidiaries across 19 tax havens.
The staggering toll of tobacco is no accident. It is caused directly by companies like BAT who continue to sell cigarettes in ways that appeal to kids, marketing cigarettes on social media, introducing flavored cigarettes and conducting aggressive marketing near elementary schools.
In fact, BAT is already in tax disputes in Bangladesh as well as Brazil, Egypt, South Korea, South Africa and the Netherlands for a total of over $2 billion if the judgments were to go against the company. The beleaguered company also faces investigations for corruption in the U.K. and Kenya.
Today’s report is further evidence – as if more evidence were even needed –that Bangladesh and other low- and middle-income countries cannot trust BAT and must immediately launch investigations into the company’s corporate tax payments or continue losing millions in sorely-needed revenues. The report paints a picture of a company intent on maximizing profits for its shareholders – the overwhelming majority of which live in high-income countries – and paying the minimal amount to countries left to deal with the burden of death and disease caused by its products.