About a month ago, the ever-amazing Bill Nighy argued in an interview with the UK’s Sunday Independent that hunger – whatever we may mean by that – could be eradicated by forcing big multinationals to pay their taxes. Nighy, who is a spokesman for the anti-hunger If Campaign, has a point. As a Guardian investigation demonstrates, these global businesses and their subsidiaries go out of their way not to pay their taxes – something which hits developing nations particularly hard:
The Zambian sugar-producing subsidiary of Associated British Foods, a FTSE100 company, contributed virtually no corporation tax to the state’s exchequer between 2007 and 2012, and none at all for two of those years.
The firm, Zambia Sugar, has recently posted record pre-tax profits and its huge plantation is increasing its capacity to produce more sugar for markets in Europe and Africa. Yet it paid less than 0.5% of its $123m pre-tax profits in corporation tax between 2007 and 2012.
The company benefits from generous capital allowance and tax-relief schemes in Zambia, but the investigation also found that it funnels around a third of its pre-tax profits to sister companies in tax havens, including Ireland, Mauritius and the Netherlands. Tax treaties between Zambia and some of those countries mean the state’s revenue authorities are unable to charge their normal tax on money leaving their shores.
If businesses like Associated British Food paid their taxes in countries like Zambia, then, the logic goes, these governments would have enough money to ensure that everyone would have access to enough food.
But tax evasion has implications for everyone’s food supply, and not only those who live in low- to middle-income countries. As the recent horsemeat scandal in Europe shows, the presence of horsemeat in ready meals and fast food products was partly the work of a network of businesses which managed to evade both (admittedly shambolic) regulators and tax by operating through scrutiny-free offshore companies.
Romanian horsemeat entered the European food chain when meat from two abattoirs was sold to Draap Trading Limited, which sold the meat to European food companies, like the meat processor Spanghero – whose licence was suspended earlier this month after being accused of knowingly mislabelling horsemeat as beef in some of its products.
Draap Trading Limited operates in the Netherlands, but is registered in tax-flexible Cyprus. Its sole shareholder is a firm based in the British Virgin Islands, another tax haven. Not only does this arrangement allow Draap to avoid paying tax, but it becomes almost impossible to identify Draap’s shareholder. Investigators suggest that the shareholder may be linked to a collection of Russia-linked offshore companies which have, in the past, been involved in high-profile transactions in Russian industry. Importantly, there are allegations that these businesses are connected to gang activity.
Exciting as these revelations may be, this is certainly not the first time that food adulteration has been linked to organised crime. In Italy, write Anna Sergi and Anita Lavorgna:
The Cosa Nostra, the Camorra and the ’Ndrangheta have long sought to gain a foothold in the fruit and vegetable market, which is one of the most profitable markets in southern Italy. Police investigations over the past two years indicate that mafia families are beginning to have a presence in every stage of the agricultural market – from production to transport. The illegal activities are numerous and market distortion is fundamentally based on the monopoly to transport and distribution in the south, but the phenomenon is widespread across Italy.
The clans have been entering every stage of production – from cultivating products to transporting goods to local markets. It is a business that involves approximately 150 different crimes every day, according to SOS Impresa (an association of Italian business owners created to combat organised crime) and an estimated one third of farmers are affected by this.
Crimes include ‘theft of machinery and tools; extortion; the theft of livestock and cattle; unregulated butchery practices; fraudulent claims for EU funds; and the exploitation of labour.’ These have appalling consequences for the environment, employment practices, and, indeed, food safety – particularly because the clans not only ignore regulations around hygiene and animal welfare, but are also involved in the illegal butchering and trafficking of potentially contaminated meat.
In the US, the Mafia and pizzerias have a long and complicated relationship. Between 1985 and 1987, the Pizza Connection Trial revealed that mobsters had used a collection of pizza parlours as fronts for the sale and collection of heroin and cocaine. Throughout the twentieth century, though, the mob controlled supplies of ingredients to pizzerias. For instance,
Al Capone – who owned a string of dairy farms near Fond du Lac, Wisconsin – forced New York pizzerias to use his rubbery mob cheese, so different from the real mozzarella produced … in New York City since the first immigrants from Naples arrived in Brooklyn around 1900.
As the story goes, the only places permitted to use good mozzarella made locally were the old-fashioned pizza parlours like Lombardi’s, Patsy’s, and John’s, which could continue doing so only if they promised to never serve slices. … Apparently, neighbourhood pizzerias that served slices and refused to use Capone’s cheese would be firebombed.
As the connection between organised crime and food is nothing new, so is the link between food and tax evasion. Nicholas Shaxson begins his excellent Treasure Islands: Tax Havens and the Men Who Stole the World (2011) with an account of the incredible wealth and power of the Vestey brothers. These two men controlled the meat industry during the early twentieth century. Ian Phimister explains:
Prior to 1914, Vesteys had interests in South America, China and Russia, and extensive land holdings in South Africa; it gradually extended its operations to embrace Australia, New Zealand and Madagascar. The company also owned ‘five steamers refrigerated and fitted for the carriage of frozen meat which they use largely for their own trade. Major expansion occurred, however, primarily after the war when in 1922 they absorbed the British and Argentine Meat Company. Vesteys had previously owned over 3,000 butcher shops in England, and the take-over added between 800 and 900 shops to that total. Overall, it was thought that the ‘deal gave Vesteys control over one-quarter of the Argentine export trade.’ On the other side of the world, Vesteys leased 20 million acres in northern Australia where they ran 300,000 cattle. Generally speaking, these were low-grade animals, but their low cost of production gave Vesteys a competitive selling edge, especially during the Great Depression when beef prices collapsed. There were no rail charges because cattle were ‘walked’ to the freezing works, and labour costs were the envy of even South Rhodesia: ‘they employ about 200 aborigines who do not seem to have advanced as far as our natives – at any rate they are only starting to ask for money wages.’
Essentially, Vesteys owned every link in the food chain: from the land on which cattle were farmed, to abattoirs and newly-invented cold storage warehouses, to refrigerated ships and the butchers who sold the meat to shoppers in Britain. But they didn’t limit themselves to beef: they shipped eggs, chicken, ducks, pork, and dairy products from China and Russia, as well as mutton from Australia and New Zealand.
What the example of Vesteys demonstrates – above all – is that big food multinationals have existed since the early twentieth century and have used the same tactics for more than a hundred years. Monsanto and Cargill have the same monopolistic instincts and low regard for labour rights and animal welfare as Vesteys. Moreover, our food supply has been globalised for as long – if not longer – and the myth that once upon a time all butchers were independent and totally ethical is, well, just that – a myth.
But Vesteys also illustrates how food companies dodge taxes. William and Edmund Vestey went out of their way never to pay tax if they could help it. When the British government began to tax British companies on profits earned abroad, to raise funds for the war effort in 1914, the Vestey brothers first lobbied against the measure, and then upped sticks to Chicago and then Buenos Aires, to take advantage of America and Argentina’s less onerous systems of taxation.
They used a range of strategies now commonplace among multinationals to channel their profits away from countries with high tax rates – the countries, in other words, where they did business. Also, in 1921 the Vesteys established a trust based in Paris which the British authorities could not tax (they didn’t even discover it until 1929). Giving evidence to a Royal Commission established to investigate how to tax multinational businesses, William Vestey summed up his attitude towards taxation:
If I kill a beast in the Argentine and sell the product of that beast in Spain, this country can get no tax on that business. You may do what you like, but you cannot have it.
In 1934, Argentinian authorities which had long been uneasy about the brothers’ cutthroat business practices came across a cache of secret documents hidden under a pile of guano on their ship, the Norman Star. The investigation launched after finding this deeply incriminating evidence was blocked and manipulated at every turn by the Vesteys – who were particularly concerned by British authorities’ interest in it. In the end, the man in charge of the committee and with the greatest knowledge of the Vesteys’ tax evasion systems, Senator de la Torre, shot himself in 1939, leaving a suicide note ‘which expressed his disappointment at the general behaviour of mankind.’
The British government never succeeded in making Vesteys pay its full tax bill. In 1980 it was revealed that two years previously, the Vesteys’ Dewhurst chain of butchers had paid only £10 tax on a profit of more than £2.3 million. As one official commented: ‘Trying to come to grips with the Vesteys over tax is like trying to squeeze a rice pudding.’
A poster in Williamsburgh’s Spoonbill & Sugartown bookshop
The only way to prevent tax evasion and organised crime is through better policing and enforcement of the law. But when food is involved, it is absolutely crucial for efficient regulatory bodies to be put in place. The publication of Upton Sinclair’s novel The Jungle in 1906, which exposed the appalling conditions under which people worked and cattle were slaughtered in Chicago’s meat packing industry, so appalled readers that momentum behind legislation to enforce standards of animal welfare and hygiene and prevent food adulteration, gathered. The same year, Teddy Roosevelt signed the Pure Food and Drugs Act into law. Even though sustained lobbying from big food had weakened America’s regulatory bodies – and has allowed for an increase in instances of contaminated food being recalled – American food is considerably safer now than it was at the end of the nineteenth century.
Without regulation, disasters like the recent milk scandal in China, can occur. Indeed, in 2011 a study published in the Chinese Journal of Food Hygiene estimated that more than 94 million people in China become sick – and 8,500 die – each year from food poisoning. Other than the discovery of melamine in milk and infant formula, there have also been scandals around ‘meat containing the banned steroid clenbuterol, rice contaminated with cadmium, noodles flavored with ink and paraffin, mushrooms treated with fluorescent bleach and cooking oil recycled from street gutters.’
Rotten peaches pickled in outdoor pools surrounded by garbage are spiked with sodium metabisulfite to keep the fruit looking fresh and with bleaching agents and additives harmful to the human liver and kidneys. The peaches are packed in uncleaned bags that previously held animal feed and then shipped off to big-brands stores.
These discoveries – of deadly infant formula, endemic tax evasion among big food companies, food cartels, forged hygiene certificates, forced labour, and deliberately mislabeled meat – are made only at the end of a series of criminal acts. Trying to fix food systems at the point at which food scandals are discovered – by blaming shoppers for buying cheap meat or for supporting multinational companies – avoids tackling the major, systemic problems which allow for businesses not to pay tax, or for criminals to take over the food chain. It’s like shutting the stable door after the horse has bolted.
Sources
Jennifer Ning Chang, ‘Vertical Integration, Business Diversification, and Firm Architecture: The Case of the China Egg Produce Company in Shanghai, 1923-1950,’ Enterprise and Society, vol. 6, no. 3 (September 2005), pp. 419-451.
Arlene Finger Kantor, ‘Upton Sinclair and the Pure Food and Drugs Act of 1906: “I Aimed at the Public’s Heart and by Accident I Hit It in the Stomach,”’ AJPH, vol. 66, no. 12 (December 1976), pp. 1202-1205.
I. R. Phimister, ‘Meat and Monopolies: Beef Cattle in Southern Rhodesia, 1890-1938,’ Journal of African History, vol. 19, no. 3 (1978), pp. 391-414.
Anna Sergi and Anita Lavorgna, ‘Trade Secrets: Italian Mafia Expands its Illicit Business,’ Jane’s Intelligence Review, September 2012, pp. 44-47.
Nicholas Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (London: Vintage, [2011] 2012).
Tangerine and Cinnamon by Sarah Duff is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.
Tangerine and Cinnamon 
Nov 5
Chop Suey in Barberton
A few weeks ago I was accepted on a writing retreat held periodically at Pullen Farm, a facility owned by Wits University about five hours’ drive northeast of Johannesburg. One afternoon we made the short journey to Barberton, a small town whose chief attraction is that there was a short-lived gold rush there more than a century ago.
Like other countries with vast, sparsely populated interiors – I think of Australia and the US – South Africa does weird towns very well. I’d visited Barberton once before, on an epic family road trip in the late-1990s, and we’ve all since remembered it as epitomising rural South African strangeness. In some ways we’d been primed to look out for the odd, having seen a newspaper headline which screamed ‘Vampire Mermaid Strikes Again!’ in nearby White River. (It’s the ‘again’ which I find so intriguing.)
It’s difficult to pin down exactly what made Barberton so strange: the quiet, deserted town centre in the middle of the day; the old-fashioned shops selling unusual combinations of things (kitchen utensils with shoes, for instance); or the unfriendly townspeople. It has some magnificent, deserted, Victorian buildings, which sit side-by-side with Art Deco and 1970s brutalist municipal offices.
Now, Barberton has a new shopping centre which seems to be pulling people away from the rather dilapidated main road. But there is still a general dealer there that buys everything ‘from teaspoons to your mother-in-law.’ I found a copy of Die Volkome Huwelik (The Complete Marriage), the Dutch Reformed Church-endorsed sex manual of the 1970s, for R5 at a junk shop also selling mannequins, a till, and a couple of washing machines.
A Barberton junk shop.
Barberton seems to be trying harder to make something of its brief moment of international significance in the 1880s, with a collection of museums relating to the gold rush. We had lunch at the Phoenix Hotel, established in 1886 to provide accommodation to visiting mine magnates and better-off prospectors hoping to find their fortunes in the newly discovered gold deposits near the town. With the opening up of richer gold seams on the Witwatersrand, these wealthy investors packed up and moved to Johannesburg.
It is now a Chinese restaurant and sushi bar. The menu – which is extensive, and split between the staples of mid-market South African dining and some ‘Chinese’ dishes and sushi – provides diners with a handy guide to using chopsticks. There are lanterns and banners with shiny lettering draped around the restaurant, which was mainly empty.
I had vegetables and stir-fired noodles, and others had Szechuan beef, prawns with rice, spring rolls, and sushi. I’ve certainly eaten more interesting Chinese food elsewhere, but this certainly counts as one of the most unexpected Chinese meals I’ve ever had.
In some ways, though, the presence of a Chinese restaurant – and one run by a Chinese family – in Barberton should not be at all surprising. In the light of China’s growing investment in Africa, recent immigrants from China have settled across the country, mostly opening small businesses. Along with the inevitable Pep Stores, Sasko bread truck, and branch of Absa bank, the Chinese shop is becoming a feature of rural towns and villages.
Johannesburg now has two Chinatowns. There has been a small Chinese-South African population, based mainly in the country’s larger cities, since at least the nineteenth century. Between 1904 and 1907, around 63,000 Chinese indentured labourers were brought to the Witwatersrand to work on the mines, but the vast majority of these men returned home afterwards. Under apartheid, there was an influx of people from Taiwan after it was recognised by the National Party over mainland China.
In 2008 the Chinese Association of South Africa succeeded in compelling the government to reclassify Chinese South Africans as ‘black’ so that they, too, can benefit from post-apartheid black economic empowerment and affirmative action policies. This was in recognition of the fact that Chinese people also were discriminated against on the grounds of their race before 1994.
There are around 200,000 Chinese people living in South Africa at the moment. The increase in this small population – since the early 2000s, around 24,000 Chinese have settled in South Africa (and I’m not absolutely certain of that figure) – has given rise to warnings of a ‘yellow peril’. Chinese people have been victims of xenophobic attacks, and last year the investigative magazine Noseweek published a disgraceful article alleging that, among other things, Chinese shopkeepers deliberately drive South African businesses into the ground.
This suspicion of recent Chinese immigrants would be interesting were it not quite so old. Similar allegations were levelled against the Chinese in early twentieth-century California and New York, for instance, and particularly on the grounds that Chinese refused, apparently, to integrate socially and culturally.
Ironically, though, the food served so successfully by Chinese cooks to Californian gold diggers or New York construction workers was a kind of hybrid of Chinese – and given the heavily regionalised nature of China’s cooking, there isn’t really a single ‘Chinese’ cuisine – and American cooking. Chop suey and other dishes were invented to use ingredients Chinese chefs could find in the US, as well as to appeal to American tastes.
Having become increasingly accustomed to the more sophisticated Chinese food now fairly easily available outside of China, the menu at the Phoenix Hotel, along with the dragons and fans of the décor, felt strangely retro. It listed the amalgam, ‘Western-Chinese’ dishes – including chop suey – which can be found just about wherever Chinese cooks have set up shop.
Sitting in this small, depressed mining town – there is still a gold mine and a prison, but unemployment is very high – despite the incongruity of eating Chinese food in the Phoenix Hotel, I was struck by the continuities of this situation. The family running the restaurant are part of yet another wave of immigrants – following on from the prospectors and diggers of the late nineteenth century – drawn to a country which seems to offer them a better chance, and certainly more political freedom, than does their homeland. And they continue to serve a cuisine which attempts to be both exotically enticing and comfortably familiar to their customers.
Tangerine and Cinnamon by Sarah Duff is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.