US multinational Mondelez International, parent of Cadbury since the UK company was taken over by Kraft, avoided paying UK corporation tax last year despite the chocolate maker making profits of £96.5m in 2014 and £83.6m in 2013, according to a weekend news story.
The Sunday Times reported that Mondelez was wiping out Cadbury’s bills using interest payments on an unsecured debt, which is listed as a bond on the Channel Islands’ stock exchange.
The arrangement, which is legal, allows interest paid on the loan to be offset as a loss against gains made elsewhere in the company and enabled Mondelez to avoid paying UK corporation tax.
“Multinationals like this are deliberately exporting their profits with artificial company structures to avoid tax,” Margaret Hodge, chairwoman of the House of Commons all-party group on responsible tax, told the Sunday Times. “The founders of Cadbury who set it up as an ethical company will be turning in their graves.”
A Mondelez spokesperson, responding to the report, said: “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, and on a global basis we pay hundreds of millions of dollars in corporate income tax annually. Since 2010 we are proud to have invested over £200m into both UK-based manufacturing and research and development (R&D) supporting our 4,500 employees in the UK.
“Importantly, independent academic research has also shown that as a business we are worth over £1bn to the wider UK economy, illustrating our impact reaches far beyond the factory gates.”
Mondelez was set up as the parent for Cadbury after Kraft Foods acquired the UK company in a £11.5bn deal in 2010. At the time, Kraft pledged that it would not cut any jobs in the UK after the acquisition, but promptly announced soon after the takeover that it was closing a plant in Bristol with the loss of 400 jobs.
However, the company was defended by Stephen Herring, head of taxation at the Institute of Directors (IoD). “What Mondelez has done is barely even describable as tax avoidance,” he said. “It is the route that most international companies take when acquiring a company in the UK.”