Taxing Bananas

In the first few years of my life, I was surrounded by bananas. Their smell permeated everything. I grew to hate them. I eat them these days, and each time I eat one, I am reminded of the plantation workers who grew the bananas. The first playing balls we had were made from the tubular blue plastic covers that were used to protect the bunches of bananas as they grew larger.

Recently, I came across an article on the Tax Justice Network site detailing how those poor plantation workers are cheated of a decent living by multinationals. It’s all in the taxation, you see.

The Tax Justice Network refers to an article in The Guardian  which details how this is done. How? By tax weighting. How does this work?

“About 60% of world trade now consists of internal transfers within transnational companies, according to the OECD. By weighting their costs towards countries such as the UK or the US that have higher rates of tax, corporations can make little taxable profit in those countries. Instead their profits are weighted towards subsidiaries they have set up in jurisdictions that charge little or no tax.”

Basically, the transnational companies get the bananas from poor countries, where they pay limited taxes. On paper they sell the bananas at an artificially low price to one of their many subsidiaries in, say Jersey , which is a tax haven. That subsidiary then sells the bananas to another subsidiary of the same company in the country where they will be sold to actual people at an artificially high price. So all of the profits accrue to the subsidiary in the tax haven. Consequently, the profits are low in the country where the bananas are produced and in the country where they are sold, but high in Jersey, where the bananas never actually go.

Since Jersey is a tax haven, it means that the companies then pay low taxes to Jersey, cheating both the country of production (Cameroon, in our example) and the country of sale (the United Kingdom).

Very clever, isn’t it?

The three companies mentioned in the article are Dole, Chiquita, and Fresh Del Monte. According to the Cameroon Development Corporation (CDC) website, the bananas grown in the Molyko plantation I knew as a child are sold to Del Monte. I remember the children who grew up in the camps where the plantation workers lived. They were my classmates and friends. They grew up in cramped wooden shacks and few of them were able to escape the poverty. Teenage pregnancies were rife. I have not been back to the area since I left it, so I do not know whether anything has improved. But I rather doubt it.

Let us imagine a scenario involving Del Monte bananas from Molyko. First, a quote from the Guardian article:

“Fresh Del Monte, currently the supplier of the vast majority of Asda's bananas and some of Morrisons', is registered in the Cayman Islands and has more than 30 Cayman subsidiaries. The Caymans have a zero rate of corporation tax. It also has subsidiaries in other tax havens including Gibraltar, Bermuda, the Dutch Antilles and the British Virgin Islands. Over the last five years its actual tax paid has been as much as $69m a year less than tax calculated at the standard US corporation rate."

I don’t know what the Fresh Del Monte policy is in Cameroon, but this is what it does in Costa Rica:

“Fair trade campaign group Banana Link says Fresh Del Monte sacked all 4,300 of its workers on its Monte Libano plantations in Costa Rica in 1999 and re-employed people on reduced wages and benefits, a model it later rolled out across all its plantations. Chiquita's plantation labour costs meanwhile, which were 5% of its total costs in 2004, had been cut to just 2% in 2006.”

What do you think it does in Cameroon? Well, in its defence, this is what it says:

“Fresh Del Monte said it too operated in many countries and complied with all local tax law and international tax treaties. It added that it also complied with all local labour laws, was a strong proponent of freedom of association, and that the average wage of its agricultural employees in the countries where it operates exceeds the mandated minimum agricultural wage.”

Now, before you go off half cocked about how these white imperialists are exploiting us, read this excerpt from another article in the Guardian:

“US-based corporation owned by Jordanian-Palestinian Abu-Ghazalleh family. It controls about 16% of world bananas and supplies the majority of Asda's bananas and some of Morrisons'. It has over 30 subsidiaries in the tax haven of the Cayman Islands, as well as in other low tax areas including Bermuda and the British Virgin Islands. Over the last five years its actual tax paid has been as much as $69m a year less than tax calculated at US corporation tax rates.”

No, it’s a bunch of rich Jordanian-Palestinians. If that does not show you that the world is a complicated place, then nothing will. But one thing is clear.

 Tax havens should be abolished.

Comments

[Tony Saiz]

Please check your information carefully; in the case of the Cameroon, Del Monte Fresh Produce deals exclusively with CDC and owns no land nor operates the plantation. DMFP has a small number of employees-primarily providing administrative and technical assistance-while CDC is both the selling company as well as the employer of the 4k+ banana plantation employees. Taxes paid in Cameroon by DMFP are in accordance to local laws and regulations but frankly are irrelevant as CDC operates its business independently of DMFP. To be fair, you might have also noted how your friends would have fared back in the Molyko plantation if DMFP and CDC did not have a business relation-that would have been easy enough to do as these plantations were in ruins and in semi-bankruptcy before DMFP and CDC entered into business in the early 90's. Its always easier to criticize than to see the value of working together.