International charity organisation, ActionAid has accused British sugar giant, Associated British Foods (ABF), of avoiding tax in Zambia.

According to a report released by ActionAid titled “Sweet Nothings”, ABF’s Zambian unit, Zambia Sugar, has made profits of $123 million in Zambia since 2007 but paid virtually no corporate tax. It says Zambia Sugar used the tax system to move $83.7 million out of the country into tax havens like Ireland, Mauritius and the Netherlands; thereby reducing tax profits.

“We estimate that Zambia has lost tax revenues of some $17.7 million since 2007, when ABF took over the Illovo sugar group,” ActionAid said.

The report, which is the production of a year-long investigation into corporate tax avoidance in Zambia also accused ABF of “exploiting two separate tax breaks originally intended respectively for domestic Zambian farmers and big foreign investors.”

London-headquartered ABF is the producer of brands such as Silver Spoon sugar, Kingsmill Bread and Twinings tea.

It has since denied the allegations made by ActionAid.

A statement released by ABF on its website said its Zambian Unit “denies emphatically that it is engaged in anything illegal, immoral or in any way designed to reduce the tax rightly payable to the Zambian government.”

It argues that it has “an open and transparent relationship with all the tax authorities in the jurisdictions in which it operates.”

“Since 2008, Illovo has invested £150 million to double the production capacity in Zambia and so create the largest sugar mill in Africa. This mill and related activities provide employment for more than 5,000 people. Capital allowances on this investment have resulted in no corporate tax being payable since the investment was made.”

“The availability of these allowances, used by governments all over the world, has nothing to do with tax avoidance. African governments should be as free as any other to attract investors,” the company said.

The company said its African sugar-producing subsidiary, Illovo, which is part of Zambia sugar has paid  £120 million ($189 million, 141 million euros) in taxes over the last five years.

“Payments made by Zambia Sugar for the services of third-party contractors, expatriate personnel in Zambia and export services provided by Illovo, are made at cost … there’s no artificial reduction in profit in Zambia Sugar.”

It condemned the ActionAid’s report, saying it is a “highly inflammatory account of the company’s tax position that is incomplete at best and factually wrong in places.”

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.”

Tax avoidance by corporate multinational companies has been a front burner political issue. Multinational companies such as online retailer Amazon, Starbucks and Internet search giant Google has been allegedly found wanting in recent times.

Chris Jordan, a tax specialist  and one of the authors of the ActionAid report, says “Tax avoidance by Associated British Foods in Zambia is helping to keep people locked in hunger.”

“We know that business can be a force for good in Africa, but this is massively undermined when a company doesn’t pay its fair share of tax.”

Jordan added that “This is a really shocking case where the Associated British Foods group has gone to great lengths to ensure it pays virtually no corporation tax in a very poor country. Tax avoidance is not victimless financial engineering. In Zambia 45 percent of children are malnourished and two-thirds of the population live on less than $2 a day.”

Researchers estimate that Zambia’s economy loses some $2bn each year because of tax avoidance by multinational corporations, leading to poor public services for Zambians.

It is estimated that the tax haven transactions of this one British headquartered multinational deprived Zambia of a sum 14 times larger than the UK aid provided to the country to combat hunger and food insecurity.

The total loss to tax avoidance by multinationals in the developing world is estimated to be around £70 billion a year, enough to save the lives of 85,000 children under the age of five in the world’s poorest countries every 12 months, campaigners say.