RB calls for tougher tax laws that would protect poor countries following Oxfam investigation
Melanie Kramers Senior Press Officer
13th Jul 2017
British multinational RB, the manufacturer of household items 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 as a result of 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 urged RB and other companies to voluntarily publish information about their tax practices in every country where they operate.
RB today issued a statement calling on governments - including the UK - to create a level playing field to ensure companies that don't exploit loopholes in the tax system to slash their tax liabilities are not undercut by rivals who do. Ten months after the UK Government passed legislation to enable the introduction of comprehensive public country by country reporting for multinationals, Oxfam is calling on it to implement this by the end of 2019 - unilaterally if necessary.
Mark Goldring, Oxfam GB chief executive, said: "We welcome RB's support for greater tax transparency. It's important that successful companies like RB make the case for action to upgrade the outdated global tax system - it shows that multinationals under pressure to maximise profits want a fair business environment where there is no incentive to shift profits to reduce their tax bills."
RB's move follows an Oxfam investigation which found that what RB terms 'developing markets' may have lost as much as £60m in revenue as a result of 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 to provide public services including clean water and life-saving healthcare. The results of the investigation are detailed in a report, 'Making Tax Vanish', published today.
Oxfam's investigation did not find any illegal activity on RB's part. Researchers analysed 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.
Goldring added: "Companies like RB have a vital role to play in reducing poverty. But this role will only be fully realised if RB and other companies pay taxes in line with their economic activity in every country where they operate, not where they can negotiate a smaller bill. Oxfam is looking forward to further discussions with RB on this issue.
"Governments must work together to agree a new round of international tax reforms that will prevent global corporations from shifting profits and people in poor countries from being short-changed."
The UN estimates that tax dodging by big companies costs developing countries at least $100bn (approx. £78bn) 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.
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.
Spokespeople available for interviews. For more information please contact Melanie Kramers: firstname.lastname@example.org / +44 7825 088894 or Meg Pruce: email@example.com / +44 7824 824359
Bangladesh case study and human interest story available on request.
This case study is an example of a developing country that is collecting much less tax than it could be. Despite Bangladesh's economic potential, 40m people live in poverty and its public services are hugely under-resourced. Please note that Oxfam is not suggesting that RB has avoided tax in Bangladesh.
Notes to editors
- Oxfam's 'Making Tax Vanish' report and methodology includes recommendations for governments, investors and companies on p5, and RB's full response to this report in the Appendix.
- Oxfam researchers found that after creating regional headquarters 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 organising its business to be closer to customers and consumers - but Oxfam's research suggests that saving tax is likely to have been a significant business reason. Proportionally very few of its customers are in these countries. The huge sums flowing through the regional HQs cannot be explained by domestic activity. The profits and revenue accounted in the Netherlands HQ, 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 regional HQs, they shrank in other countries despite revenue remaining broadly the same. In France, for example, profits halved after the creation of the Netherlands HQ responsible for Europe and North America. Oxfam could not find evidence of any other factors besides the creation of the regional HQs - such as significant business changes, the impact of new allowances or favourable rulings - that could explain the sudden drop in RB's global ETR.
- 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 HQ has been roughly one quarter of the Dutch corporate income tax rate of 25 percent.
- Oxfam is not suggesting that RB does not pay sufficient tax in the UK.
- 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 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.
- 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.