They make Heroes but when it comes to tax it’s all about zeros...
The business that sells and distributes Cadbury products in Britain paid no corporation tax here last year even though its profits rocketed by more than 700% to £185million.
Mondelez UK Ltd – the biggest British offshoot of the US owner of chocolate giant Cadbury – managed to offset its profits to help wipe out the potential £35million tax bill.
And while the public purse missed out, the company channelled a dividend of nearly £250million offshore to its immediate parent company, headquartered in low-tax Switzerland.
Mondelez UK Ltd is one of a network of 48 British subsidiary companies of the US parent.
An investigation by the Mirror can reveal these offshoots paid £5.9million combined in corporation tax last year on profits of £1.3billion.
Shadow Chancellor John McDonnell said: “This is outrageous. Time and time again we’ve warned the Government this type of behaviour is unacceptable.
“We have told them they urgently need to tighten the rules on tax avoidance.
“This will do nothing but anger people who are going out to work every day, paying their taxes through PAYE.
“The Government has to act now to crack down on tax avoidance.”
Alex Cobham, chief executive of the Tax Justice Network, called what Mondelez was doing “a piece of financial engineering that is very sad given Cadbury’s long history of working to generate value in the communities where they work”.
He added: “Mondelez are stripping value out, by siphoning off taxable profits from the UK through large intra-group dividend payments. It is a problem with international tax rules.”
He called on Chancellor Philip Hammond to use this month’s Budget to enact powers which the Treasury already has to force multinationals to produce country by country accounts.
These would show the total profit made for all their companies in each market and the tax paid.
Our revelations will compound criticism of Chicago-based Mondelez International, which when it was known as Kraft, was controversially allowed to buy Cadbury for £11.5billion in 2010.
In 2008, shortly before it was bought by Kraft, Cadbury paid £240million in corporation tax. Things changed after Kraft won control of the business.
Around 400 jobs were lost when Kraft axed Cadbury’s Somerdale factory in Keynsham, near Bristol. Production was moved to Poland instead.
Then it axed hundreds of jobs at Bournville in Birmingham.
Mondelez has also been criticised for decisions such as reducing the size of tubs of Heroes, and dumping the Fairtrade cocoa certification in favour of its own scheme.
Accounts for Mondelez UK, which sells other brands as well as Cadbury products, show its turnover rose from £1.64billion to £1.66billion.
Its profits leapt from £22million to nearly £185million. The surge was mainly due to £146million of dividends from two subsidiaries, coming from a coffee business in the Netherlands and the sale of its Terry’s chocolate business.
This cash offset its profits and helped cut the corporation tax – which is payable on profits – to zero. The practice is not uncommon, but experts say the tax would usually have been paid by the two subsidiaries.
Yet accounts for the two showed one paid no tax and the other just £2,000. The accounts for Mondelez UK even showed a tax credit of £320,000.
A spokesman insisted: “This is an accounting item and is not a tax or cash credit.” Mondelez added: “In common with all global businesses, we pay corporation tax based on the laws of the countries in which we operate.
“We comply with all applicable tax legislation in the UK, as directed by HMRC and the Government. We [pay] tax in more than 165 countries, and on a global basis pay hundreds of millions of dollars in corporate income tax annually. We are a significant contributor to the UK economy, through direct spending on employees and suppliers, and the recirculation of that expenditure in the economy.
“We are investing in our business here and since 2010 are proud to have invested over £200million in UK-based manufacturing and R&D supporting our 4,000 employees in the UK.”
Mondelez International also owns Kenco, Bassett’s and Oreo.
- Campaign group Tax Justice UK is demanding changes, such as raising corporation tax from 19% to 20%, to rake in over £23billion for the NHS.
We must nail the myth that we are all avoiders now
COMMENT
By Paul Monaghan
Of the Fair Tax Mark
Another day, another set of impenetrable figures. This time it’s Mondelez UK and connected company Cadbury UK, which has just reported a seventh year of zero corporation tax payments.
These tax avoidance stories create an impression that everyone is “at it”. A myth has been spun telling us that if we buy duty-free, invest in an ISA or top up our pension we are tax avoiders – so should back off criticising the likes of Amazon and Facebook.
Wrong. No tax is being avoided as no tax is due. Those who say we should feel guilty are likely seeking to de-stigmatise the immorality of tax avoidance.
In recent years, HMRC has begun to clamp down on avoidance – which it describes as “bending the rules to gain an advantage Parliament never intended” – and evasion, which is illegal. It is estimated the cost to the UK is £7billion a year – 180,000 nurses. Campaigners want multinationals to be forced by governments to produce country-by-country reports of income, profit and taxes. Thankfully a growing movement of firms here – Lush, Timpson, SSE, and the Co-op included – are backing the Fair Tax Mark.
In 2016 a group of MPs forced an amendment to a bill requiring large corporations to report country-by-country. It’s time to enact those powers and for the UK to take the lead on tax transparency.
From slums to global success
Cadbury dates to 1824, when Quaker John Cadbury opened a grocer’s shop in Bull Street, Birmingham.
Among other things it sold cocoa and drinking chocolate – seen as an alternative to alcohol, which Quakers deemed bad for society.
The firm began manufacturing in 1831, and by 1842 it was selling 16 types of drinking chocolate.
The business passed to sons Richard and George who, at the end of the 1870s, moved the chocolate factory out of the Birmingham slums and into what became the leafy suburb of Bournville.
They added a village green and cricket pavilion. Cadbury milk chocolate bars followed in 1897, then Bournvillle dark chocolate in 1908, then a host of others.
In 1928 came the company’s Glass And A Half symbol for Dairy Milk.
Cadbury merged with Schweppes in 1969, but split in 2008.
In 2010, Cadbury was bought by Kraft, despite opposition.
Kraft boss Irene Rosenfeld, who masterminded the deal, pocketed a £17million pay and perks deal the previous year.
Takeover action leaves bad taste
The anger sparked by the sale of Cadbury to US-based giant Kraft prompted an investigation in Parliament.
And when Kraft broke a promise to keep open the Cadbury factory near Bristol the deal was only just sealed.
In 2013, it was slammed for scrapping an annual Christmas gift box to retired staff to cut costs and for shaving 4g off each Dairy Milk bar but nothing off the price.
In 2014, Kraft ended a Christmas tradition by stopping making its iconic chocolate coins.
It triggered furore in 2015 by changing the recipe for its best-selling Cadbury Creme Egg. The shell of Cadbury Dairy Milk was dropped in favour of what critics complained was an inferior version.
Earlier this year Cadbury chocolate bars were banned from NHS buildings in a row over prices. The firm which supplies hundreds of hospitals refused to stock brands such as Dairy Milk, Wispa and Crunchie.