A Fishy Business: Shifting Profits Out of Africa
21 Jul 2020

By Margot Gibbs, Finance Uncovered, 20 July 2020

OCCRP — Leaked documents and an affidavit from a whistleblower working at a major Western fishing company operating in African waters have given rare insight into how food multinationals can shift profits around the world to avoid paying taxes in developing countries.

The files, from Icelandic fishing giant Samherji, which supplies sardines and mackerel to major supermarkets such as Tesco and Carrefour, were uploaded to the Wikileaks website last year by a whistleblower. Johannes Stefansson was once the managing director of Samherji’s companies in Namibia, but he is now working with authorities there on a criminal investigation into what has been dubbed the “Fishrot” scandal.

Ministers and company executives were forced to resign after a series of explosive reports showed Samherji had paid millions of dollars in bribes to gain access to Namibia’s lucrative fishing quotas. The company brought in lawyers to investigate after Al Jazeera, Icelandic broadcaster RUV, and OCCRP member center The Namibian broke the scandal late last year.

But Stefansson’s complaints were not limited to allegations of bribery. In a lengthy affidavit provided to Namibia’s Anti-Corruption Commission, he also claimed Samherji had shifted significant revenues to group companies in what he believed to be a tax-avoidance scheme.

An analysis of the leaked files by Finance Uncovered, as well as public documents and the company’s financial statements, suggest Samherji used various techniques to reduce taxes in Namibia by shifting money to low-tax destinations like Cyprus and Mauritius.

These include sending at least 93 million Namibian dollars (US$8.2 million) in controversial “fee” payments to the group’s other companies in low-tax Mauritius and the U.K., and selling fish below market prices to group companies in Cyprus.

In his affidavit, Stefansson also alleges Samherji overcharged its Namibian company for the cost of chartering trawlers, a strategy that shifted profits out of Africa and reduced its tax bills there.

A spokesman for Namibia’s Ministry of Finance confirmed it was investigating the tax affairs of “Samherji, its affiliates and all companies as well as individuals implicated in [the] Fishrot saga.”

He added: “[Your] findings will go a long way in complementing efforts of the Ministry to investigate and audit tax affairs of these companies.”

Samherji, one of Europe’s largest fishing companies with annual revenues of some $700 million, first entered Namibia in 2012. After landing a deal two years later with a state-owned fishery that awarded it lucrative quotas to catch horse mackerel, it quickly grew to become one of the biggest players in an industry that brings in a fifth of the country’s export earnings.

Samherji strongly denies any wrongdoing. Its current co-CEO, Björgólfur Jóhannsson, said there were legitimate business reasons for all the transactions raised by Finance Uncovered, arguing that it is standard practice for multinational companies to use specific subsidiaries to legally minimize legal, tax, and operational risk.

He said Samherji had allocated “substantial” resources to investigate its operations in Namibia since the Fishrot scandal broke and launched a compliance program to improve governance across all the group’s companies. But Jóhannsson declined to comment on detailed allegations in this article until an internal legal review was complete.

Fees, Fees and More Fees

While there has been widespread reporting about similar schemes used by oil and mining giants in Africa, until now there has been little focus on one of the continent’s most precious natural resources — fish.

Maritime African countries are estimated to lose up to $1.6 billion a year in tax revenues through illegal and undeclared fishing, according to recent research. But Nick Branigan, chair of the North Atlantic Fisheries Intelligence Group, a network of international government agencies that works with the UN and Interpol on fisheries crime, said this figure is likely an underestimate.

“The problems of undeclared and illegal fishing in developing countries are magnified because multinational fisheries firms routinely strip operating profits out of developing countries and place these in low tax countries,” he said.

New findings by Finance Uncovered, showing Samherji may have avoided paying millions of dollars in taxes by moving its money between jurisdictions and reselling fish between countries, underscore the problem, he added.

One of the key ways in which Samherji appears to have reduced its taxable profits in Namibia was by sending hefty fees to its companies in other jurisdictions. Although Namibia’s corporate tax rate of 32 percent is standard for southern Africa, it is higher than in many European states and tax havens. The equivalent rates in the U.K., Cyprus, and Mauritius are 19 percent, 12.5 percent, and 15 percent, respectively.

Finance Uncovered’s analysis of company accounts, as well as leaked invoices and contracts, suggests Samherji’s Namibian entities paid N$93 million ($8.2 million) to group companies in the U.K. and Mauritius for management, intellectual property, and marketing.

Finance Uncovered’s analysis of company accounts, as well as leaked invoices and contracts, suggests Samherji’s Namibian entities paid N$93 million ($8.2 million) to group companies in the U.K. and Mauritius for management, intellectual property, and marketing.

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