An investigation by the British charity ActionAid has found that a major British corporation avoided paying income tax on hundreds of millions of dollars earned in the African state of Zambia.

The charity says that Zambia Sugar, a subsidiary of Associated British Foods (ABF), has paid almost no tax in Zambia since 2007.

The company moved millions of dollars out of Zambia and into tax havens like Mauritius and the Netherlands, reducing its taxable profits.

The report also accused ABF of "exploiting two separate tax breaks originally intended respectively for domestic Zambian farmers and big foreign investors".

ABF has denied the allegations, describing ActionAid's assertions as "illogical".

"The mill and related activities provide employment for more than 5,000 people," ABF said in a statement.

"As a direct consequence of this investment in a sustainable business, capital allowances and tax incentives were available to the company as they are to other investors."

Since 2007, Zambia Sugar has paid less than 0.5 percent of its $123m in profits, according to ActionAid - in a country where the main corporate tax rate is 35 percent; between 2008 and 2010, the firm paid no taxes at all.

"We estimate that Zambia has lost tax revenues of some US$17.7m since 2007, when ABF took over the Illovo sugar group," the charity wrote in its report, adding that this case is part of a much larger problem.

In response to the report, Illovo said it "believes that ActionAid’s work on the ground in many countries is laudable. However, this report is clearly designed with political campaigning in mind. It is inaccurate and misleading".  

Researchers estimate that Zambia's economy loses some $2bn each year because of tax avoidance by multinational corporations.

Those underpayments mean poor public services for Zambians.

In Mazabuka town, on the edge of a local sugar plantation, about 1,200 students cram into just 12 classrooms, where they are taught in shifts, according to the charity's report.

Medical care is scarce; nationwide, there is just one doctor for every 10,000 Zambians.

Source: Al Jazeera