Volcafe Using British tax haven to avoid paying developing countries taxes

[papau]

development agency Action Aid: "Coffee farmers we work with in Latin America hardly make ends meet and tax revenues are vital to improving local roads, schools and training schemes. If corporations won't act responsibly, we urgently need tougher laws." - and the Observer uncovered confidential documents in Switzerland detailing how a "ghost" company in Jersey (Cofina INC does not really exist: it is just a postbox operation with one or two administrative staff) is used to shield profits.

http://www.mg.co.za/Content/l3.asp?ao=67797

Coffee giant's ruse denies aid to farmers 13 June 2004 08:42

<snip>Volcafe runs operations across Central America, Asia and Africa, with subsidiary companies in countries such as Colombia, Peru, Nicaragua, Guatemala, Rwanda and Indonesia. Last year it sold more than 10-million sacks of coffee worldwide and is in the process of being bought by the London-based commodities trader ED&F Man.

The papers reveal a hidden world in which Volcafe transfers millions of dollars from its subsidiaries in the coffee-producing countries to a "phantom" operation in Jersey called Cofina. It is a complex structure in which Volcafe buys beans from small cooperatives in developing countries at the market price, say 80 cents a pound of coffee.

It then "sells" the raw coffee to Cofina in Jersey at a similar price. Cofina sells this on to customers such as Nestlé and, in the past, Starbucks. By trafficking the beans through the tax-haven island, the bulk of Volcafe's profits are made there, which means it pays minimal tax to the developing countries.

The Observer has seen confidential details of Cofina's 1998 accounts showing that while most of Volcafe's subsidiaries in developing countries made marginal profits and paid no tax, Cofina sold $408-million-worth of coffee and made a gross profit of $27-million. The firm paid no tax because the profit was booked in Jersey.<snip>

Guardian Unlimited © Guardian Newspapers Limited 2003

[forgethell]

1. Does this surprise you??

Companies, and people too, will always try to minimize their tax load.

[papau]

2. Actually the Brits have a saying of a gentleman always pays a fair tax

Indeed I worked with some multi-billion cases in the UK where the tax was indeed set on a handshake between Inland Revenue and the tax payer - the Inland revenue folks had concluded the tax paid was "fair". And the client had stated that paying a fair tax was the game - not interested in accounting that eliminated the tax.

These folks have violated Brit unwritten rules!

:-)

But you are correct about US taxes. You get killed if you leave a dime on the table at the start of the filing war. And you write long letters as to how reasonable the audit compromise that is suggested is to the client - indeed - it is a massive win.

:-)

[forgethell]

3. there may be gentlemen

in the UK. Paying a tax is fair. But at what amount is the discussion. Higher? Lower? Unwritten rules don't count for squat unless everybody agrees to them. Tha's why they all have to get written down, eventually, or go by the wayside. Lawyer's heaven.