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University of Bath

Big Tobacco, Big Avoidance

An analysis of the main tax avoidance structures used by tobacco companies, based on annual reports of parent companies and major subsidiaries in 2010-2019

There is growing pressure worldwide for companies to pay their fair share of tax. One sector that has lucrative revenue and profits is the tobacco industry. Although the sector makes billions in revenue, it pays relatively little in corporate taxes.

Tobacco’s Big Four transnational companies - British American Tobacco, Imperial Brands, Japan Tobacco and Philip Morris - make extensive use of the entire range of common tax avoidance methods.

We did not find any clear evidence of illegal practices (tax evasion), but analysis of their annual reports and those of a number of crucial subsidiaries in the period 2010-2019 shows that all four have ‘aggressive tax planning’ strategies, in spite of their own codes of conduct suggesting otherwise.

This report details the tax avoidance methods the four companies are using and describes some of the fiscal disputes they are involved in.

It is a first report. Because of the complicated and untransparent nature of tax avoidance it cannot be comprehensive. Many questions remain, particularly concerning the final destination of the money flows involved. The logical endgame is that many ultimately end up in tax havens. In further research we will try to shed more light on this final step in the avoidance chain.