Tobacco buyer Alliance One Tobacco Malawi (AOTM) is said to have evaded corporate income tax in Malawi in 2020 despite exporting tobacco worth over US$168 million dollars.
This is according to a published report by the Platform for Investigative Journalism (PIJ).
It states that AOTM, the country’s second-biggest tobacco leaf buyer which is under US multinational Pyxus International, made payments of over US$1.1 million USD abroad in the same year it failed to pay corporate income tax in Malawi where companies are expected to pay 30 percent of their corporate income as tax.
“In 2021, when the company paid just over 41,000 USD in corporate income tax, it paid over 2.4 million USD abroad until October 2021,” PIJ reported.
Bob Michel, comparative policy and legal analyst at Tax Justice Network, told PIJ that the payments suggest that the country made a profit and “a lot of this profit is turned into expenses that go abroad.”
In Malawi, AOTM contracts farmers who are given loans in form of inputs to grow tobacco and later pay back the loans after selling their crop. In 2019, for example, the company had direct growing contracts with over 13,000 farmers, of which 99.9 percent were smallholder farms.
Speaking to PIJ, Manson Msukwa who is one of the farmers, said AOTM is also greatly benefitting from tobacco more than the farmers.
Msukwa told PIJ that in the 2022/2023 farming year, he received farm inputs worth about MK5 Million ($2,980) on servicing his loan but after selling the crop he repaid about K10 million ($5,950) and was left with a K2 million ($1,190) profit yet he normally expects to earn K6 million from the crop.
“It’s as if I only farmed to repay the loans. I got very little profit compared to the amount of money and energy I invested,” Msukwa said.
Commenting on allegations of tax evasion, AOTM through Corporate Affairs Manager Francoise Malila told PIJ that the company paid all due taxes to MRA in 2020 and 2021. Malila added that company’s tax contributions from all locations globally are put together and reported on a global scale.
On its contracts with farmers, the company said the loans are approved by the Tobacco Commission and costs of inputs as well as prices of tobacco from the prior season are made available to farmers.
“We stress that we don’t force growers to contract with AOTM; access to the loan package is voluntary,” Malira said.
Meanwhile, the Malawi Revenue Authority (MRA) has refused to reveal AOTM’s tax records with Marketing Communications, Wilma Chalulu telling PIJ that: “Taxpayer matters are confidential, and we cannot give out such information.”
Wales Chigwenembe, a social accountability expert from Malawi, told PIJ that failing to provide financial reports to Malawian citizens is a red flag.
He said: “Multinational companies usually use their global [presence] to dodge tax, among other financial crimes. They’re operating in Malawi, profiting from the country’s important crop. Why should they hide their reports through international parent companies?”
He added that tax evasion by companies such as AOTM limits the country’s capacity to invest in sectors such as health, agriculture, and education sectors due to limited resources.
