Bentoel to drain $14 Million in Tax Revenue from Indonesia Every Year

Statement by Mark Hurley, Director of Corporate Campaigns at the Campaign for Tobacco-Free Kids
WASHINGTON, May 6, 2019 /PRNewswire/ — PT Bentoel Internasional Investama is systematically shifting income out of Indonesia to avoid paying its full corporate income tax on future profits, 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 Bentoel’s accounting gymnastics to deter taxes needed to fund healthcare and other essential services all the more reprehensible. Any argument that Bentoel strengthens the nations’ economy falls flat when the company goes to such lengths to avoid contributing its fair share.
According to the report Bentoel, the Indonesian subsidiary of British American Tobacco (BAT), declared hefty interest payments ($164 million) on an intercompany loan and royalty, fee and IT charges to its parent company BAT resulting in a 27 per cent net loss to Bentoel. The payments BAT made to itself through Bentoel are set to cost the Indonesian government $14 million in tax revenue a year off of any profit Bentoel makes in the futures. To put this in perspective, $14 million could cover the country’s yearly per capita health expenditures for 125,000 citizens.
The analysis found this behavior in Indonesia and every other country it examined. In total, for every dollar 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 exploiting the rules 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 British American Tobacco 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 countries including Bangladesh, 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 Indonesia 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.
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Source: prnasia