RB, the multinational company behind global household brands such as Dettol and Vanish, has today backed a public campaign for tougher tax laws after an Oxfam investigation suggested that poor countries are losing valuable revenue needed to tackle poverty due to its tax practices.
Oxfam welcomed RB’s support for greater transparency and tighter rules to help prevent the widespread problem of corporate tax avoidance that costs developing and developed countries billions each year – and urges other companies to follow suit. At the same time, Oxfam pushed RB and other companies to voluntarily publish information about their tax practices in every country where they operate.
UK-based RB today issued a statement calling on governments to introduce stronger rules to ensure companies that don’t exploit loopholes in the tax system to slash their tax bills are not undercut by rivals that do.
Deepak Xavier, Head of Oxfam International’s Even It Up campaign, said: “RB’s support for greater tax transparency is welcome. A fairer, more transparent tax system is good for business and good for society as a whole.
“Companies like RB can play an important role in tackling poverty – but this potential can only be realized if they pay their fair share of tax in every country where they do business, and not where they can negotiate a smaller bill. We are urging RB - and other companies – to move to voluntarily publish information about their tax practices in every country where they operate. Oxfam is looking forward to further discussions with RB on this issue.”
RB’s move follows an Oxfam investigation – detailed in its new report ‘Making Tax Vanish’ – which found that what RB terms ‘developing markets’ may have lost as much as £60m in revenue due to the company’s tax practices. Most of these markets are countries where large numbers of people live in poverty and tax revenue is desperately needed for public services like clean water provision and life-saving healthcare.
Oxfam’s investigation did not find any illegal activity on RB’s part. Researchers analyzed RB’s financial statements over several years and found that creating regional hubs in three corporate tax havens – the Netherlands, Singapore and Dubai – in 2012 and 2014 enabled the FTSE-100 company to significantly reduce its global tax rate. Reported profits suddenly plummeted in markets such as France and Australia following the creation of the hubs, despite revenues remaining broadly stable.
“Governments must work together to agree a new round of international tax reforms that will prevent global corporations shifting profits and stop people in poor countries being short-changed,” added Xavier.
The UN estimates that tax dodging by big companies costs developing countries at least $100bn every year – enough to educate the 124 million children around the world who can't currently go to school, and provide healthcare that could save the lives of six million children annually.
There is growing momentum towards greater corporate financial transparency – last week the European Parliament voted to require all multinationals operating in Europe to publish details of their activities on a country-by-country basis. Public reporting is already mandatory for European banks.
The UK Government passed legislation to enable the introduction of comprehensive public country-by-country reporting requirements for multinationals ten months ago. Oxfam is calling on it to implement this by the end of 2019.
Some companies – such as Vodafone, AngloAmerican and Unilever – voluntarily publish detailed tax strategies and some tax-related information on a regional or country basis. Increasingly, investors such as Norway’s Norges Bank Investment Management and Legal & General Investment Management – two of RB’s largest shareholders – are also calling for companies to become more transparent on tax and to adopt country-by-country financial disclosures.
Notes to editors
Download Oxfam’s ‘Making Tax Vanish’ report and methodology. It includes recommendations for governments, investors and companies on p5, and RB’s response to this report in the Appendix.
Oxfam researchers found that after creating regional hubs in three corporate tax havens – the Netherlands, Dubai and Singapore – in 2012 and 2014, the company’s global effective tax rate (ETR) dropped from an average of 25-26 percent before 2012 to 21-23 percent afterwards, despite revenues and profits remaining relatively stable. By calculating how much tax RB would have paid if its global ETR had remained at its pre-restructure average and the 2016 OECD average of 25 percent over 2014-16, Oxfam has estimated that the FTSE-100 company was able to save £200m over three years, including proportionately about a third - £60m - in the developing markets where it makes 31 percent of its sales.
RB says that the re-structuring was about organizing its business to be closer to customers and consumers – but Oxfam’s research suggests that a significant business reason was to save tax. Proportionally very few of its customers are in these countries. The huge sums flowing through the hubs cannot be explained by domestic activity. The profits and revenue accounted in the Netherlands hub, for example, are one third the size of the RB Group’s total, and would make its employees 100 times as productive as the group average.
At the same time as growing profits were booked in the hubs, they shrank in other countries despite revenue remaining broadly the same. In France, for example, profits halved after the creation of the Netherlands hub responsible for Europe and North America. Oxfam could not find evidence of any other factors besides the creation of the regional hubs – such as significant business changes, the impact of new allowances or favourable rulings – that could explain the sudden drop in RB’s global ETR.
Oxfam estimates that in the period 2013–15, RB avoided the following amounts of tax: £66.2m about €75m) in France; £71.3m in Australia (about AUS$119m); £22m in Belgium (about €25m) and £7.4m (about NZD$13m) in New Zealand. Oxfam is not suggesting RB has avoided tax in the UK. Due to a lack of transparency on what profits are made and what taxes paid, Oxfam was unable to get hold of sufficient financial information to identify tax losses in additional countries. It is particularly hard to access company financial data for developing countries, which makes it very difficult for citizens to know how much tax MNCs are paying in their country.
According to its financial statements, the Dutch subsidiary Reckitt Benckiser (ENA) B.V., has received a tax ruling from the Dutch authorities that exempts 75 percent of its profits from tax from 2013 onwards, when the structure took effect. This ruling appears to go a long way in explaining why RB’s effective tax rate in the Netherlands hub has been roughly one quarter of the Dutch corporate income tax rate of 25 percent.
Oxfam decided to investigate RB after assessing the best available evidence for several FTSE-100 companies against criteria such as whether they operate in tax havens and developing countries, and whether they use methods to avoid tax that new OECD recommendations would not prevent.
The European Parliament voted on 4 July to oblige multinationals operating in Europe to publish details of their activities on a country-by-country basis. The measure is designed to help the poorest countries fight tax evasion – but Oxfam is concerned that it is hindered by a “get out” clause that allows companies to avoid publishing details that they declare to be damaging for their business.
The UK Government accepted the Flint Amendment to the Finance Bill on 5 September 2016, which empowered ministers to require large multinationals with a headquarters or substantial presence in the United Kingdom to publish headline information about their income, employment and taxes – information already received by HMRC. It was proposed by Labour MP Caroline Flint with cross-party support.
Anna Ratcliff, Mobile +44 7796993288, Email email@example.com, Twitter: @ratcliff_anna
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