The UK Guardian has revealed that multinational banana companies are using tax haven jurisdictions to avoid paying tax on their profits in the UK and in developing countries. In the course of international investigation into banana firms, it was found that they established structures to move profits through subsidiaries to offshore jurisdictions such as the Cayman Islands, Bermuda and the British Virgin Islands.
Dole, Chiquita, and Fresh Del Monte, the three companies that control between themselves more than two thirds of the worldwide banana trade, are moving offshore to avoid paying money to tax collectors in the countries where they are producing their goods, and in those countries where they sell the largest part of their products.
To illustrate this fact: in the last five years, the three companies generated over $50 billion of sales and $1.4 bn of global profits. However, the analysis of their financial accounts shows that, over the same period, they paid just $200m in taxes between them – that is just over 14% of profits. In some years, the banana companies have paid an effective tax rate as low as 8%, although the standard rate in the United States where they have their full accounts is 35%.
Fresh Del Monte is registered in the Cayman Islands, which have a zero rate of corporation tax, and has more than 30 Cayman-based subsidiaries. The company also has subsidiaries in other tax havens including the British Virgin Islands, Gibraltar, Bermuda, and the Dutch Antilles. Over the last five years, actual tax paid has been as much as $69m a year – less than tax calculated at the standard US corporation rate. The other two companies, Dole and Chiquita, also pay actual tax below the standard rate, using subsidiary companies in Bermuda, Liberia and Puerto Rico.
The Guardian received comments on its investigation from John Christensen, the director of the campaign group Tax Justice Network, and a former economic adviser to the Jersey government. Speaking about the continuing flight of capital to offshore jurisdictions, he said, “The trend in the last 30 years has been to shift the burden of tax away from companies on to the consumer and labour. Capital is increasingly going untaxed.”
The banana companies are not the only ones to hide taxes using offshore jurisdictions. According to the OECD, about 60% of world trade now consists of internal transfers within transnational companies. The corporations can make little taxable profit in the high-tax countries, moving their real profits towards subsidiaries they have set up in jurisdictions that charge little or no tax.