Plantation giant Socfin accused of dodging taxes in Africa

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Margaret Fascia in her garden, which she said she had to defend against bulldozers looking to clear her land for a Socfin-owned palm oil plantation in Sierra Leone. (Image by Maja Hitij for Mongabay)
Mongabay | 21 October 2021

Plantation giant Socfin accused of dodging taxes in Africa

by Ashoka Mukpo
 
By the OECD’s estimates, every year countries in Africa are cheated out of more than $50 billion in taxes, mainly by multinational corporations that run mines, oil wells, and plantations on the continent. That figure is higher than the total amount of development aid given to countries in sub-Saharan Africa — and some studies suggest it could be much higher.
 
Belgian agribusiness giant Socfin is likely one of those corporations, according to a new report published by Bread for all, Alliance Sud, and the German Network for Tax Justice. The groups analyzed financial reports published by Socfin subsidiaries that manage the company’s operations in Africa, Asia and Europe, finding that a large portion of its overall profits were booked in Switzerland instead of the countries where it operates its network of rubber and oil palm plantations. The report’s authors told Mongabay that the data suggest Socfin is systematically tacking on high fees for trading services in Switzerland while claiming some of those plantations are losing money.
 
“It shows how companies like Socfin pull out or extract as much profit as possible from the land and people in these countries in Africa, and how they can shift part of it to tax havens,” said Silva Lieberherr, agricultural economist at Bread for all.
 
Socfin, or Société Financière des Caoutchoucs, is a Belgian company that is majority-owned by its chairman, Hubert Fabri, along with French billionaire Vincent Bollaré. It holds the rights to agricultural concessions that cover nearly 400,000 hectares (988,000 acres) of land, including plantations in Sierra Leone, Liberia, Nigeria and Cameroon.
 
The report says that of the 605 million euros ($704 million) in total revenue booked by Socfin in 2020, corporate filings showed it claimed more than 100 million euros ($116 million) were generated in Europe — despite the fact that it doesn’t operate plantations there. The likeliest explanation for that large European revenue stream, the report alleges, was Socfin’s Swiss subsidiary charging fees to its African subsidiaries for arranging overseas sales along with other services.
 
According to researchers, by claiming that revenue in Switzerland — where the corporate tax rate is often lower than 15% — Socfin could claim losses in Africa and avoid paying higher taxes that would have been charged by the countries where it produces rubber and palm oil
 
“What we can see is that there is a lot of profit shifting happening where profit ends up in Switzerland even though there’s very little activity there,” said Christoph Trautvetter of the German Network for Tax Justice, who analyzed Socfin’s filings for the report.
 
Those filings showed that Socfin claimed its profits per employee in Africa were around 1,600 euros ($1,860), in comparison to Switzerland, where they were 219,000 euros ($255,000) per employee.
 
Trautvetter told Mongabay that without detailed internal information about transactions between Socfin’s affiliates, he could not say for certain whether the figures indicate the company is breaking OECD rules on tax evasion. But even if technically legal, they are illustrative of a global trade regime that enables extractive industries to systematically rob developing countries of revenue that could be used to fund social services like health care and education. Switzerland, with its low corporate tax rates and strict secrecy laws, has been criticized for decades by tax justice advocates for its role in facilitating those kinds of losses.
 
“The tax rules that we use are made by the OECD, which is a club of rich countries, and they favor the countries where headquarters are based and not countries where production happens,” Trautvetter said. “It’s all enshrined and it’s a systematic problem.”
 
Socfin’s founder, Adrien Hallet, learned how to cultivate rubber while working in the Congo during the brutal colonial rule of Belgian King Leopold II, later establishing the world’s first industrial oil palm plantation in Indonesia in 1911. Today, the company still has holdings dotted across West Africa, where it has been repeatedly accused of land grabbing and human rights abuses.
 
In an email to Mongabay, Socfin refuted the report’s allegations, saying the company is in “strict compliance with the rules in force.”
 
“Revenue transfers are regulated by Swiss law, which respects OECD principles on matters of transfers. No competent supervisory authority has reported abusive behavior on the Socfin Group’s part. Socfin pays its taxes in accordance with Swiss and international rules,” a spokesperson wrote.
 
“Transfer pricing” — where corporations move services and goods between their own subsidiaries to make sure that profits are registered outside of high-tax jurisdictions — is a common practice, despite OECD rules nominally meant to protect low-income countries. Advocates say those rules are rife with loopholes, and that tax authorities in Africa and elsewhere typically don’t have access to the financial records of sprawling multinationals with numerous subsidiaries that would be needed to determine whether they’re paying their fair share or not.
 
“What we see so often across the continent is that companies come from outside, especially from former colonial powers, and use land and labor to extract resources from African countries,” said Rachel Etter-Phoya, senior researcher for the Anglophone African Hub at the Tax Justice Network. “But then they set up their headquarters and a whole raft of subsidiaries spread across the world — especially in low tax or financial secrecy jurisdictions — and underpay their taxes in those countries where they’re actually doing the core part of their business.”
 
Cash-strapped governments in those countries are then deprived of crucial revenues that could be used to help lift their citizenry out of poverty, often without them even knowing it. Rich countries, added Etter-Phoya, are tacitly supporting that theft by not implementing and enforcing fairer rules.
 
“It’s much easier and more convenient for those same countries to talk about poor governance and corruption in African countries and not look in the mirror themselves and address the broader problems of the system they designed,” she said.
Original source: Mongabay
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