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Tax Haven

What is a 'Tax Haven'

A tax haven is a country that offers foreign individuals and businesses a

minimal tax liability in a politically and economically stable environment, with
little or no financial information shared with foreign tax authorities. Tax havens do
not require individuals to reside in or businesses to operate out of their countries to
benefit from local tax policies. Due to the globalization of business operations, an
increasing number of U.S. corporations, including Microsoft, Apple and Alphabet,
are keeping cash in offshore tax havens to minimize corporate taxes.

BREAKING DOWN 'Tax Haven'

Tax haven status benefits the host country as well as the companies and
individuals maintaining accounts in them. Tax haven countries benefit by drawing
capital to their banks and financial institutions, which can form the foundation of a
thriving financial sector. Individuals and corporations benefit through tax savings
resulting from tax rates ranging from zero to the low single digits versus relatively
high taxes in their countries of citizenship or domicile.
The list of tax haven countries includes Andorra, the Bahamas, Belize, Bermuda,
the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook
Islands, Hong Kong, The Isle of Man, Mauritius, Lichtenstein, Monaco, Panama,
and St. Kitts and Nevis.

U.S. Corporations and Tax Havens

Rather than repatriating revenues and earnings from offshore operations at a

corporate tax rate of 35%, companies including Apple, Microsoft, Alphabet, Cisco
and Oracle maintain billions of dollars in tax haven accounts with tax rates in the
low single digits. The circumstances of this paradigm make it less expensive for
U.S.-based companies to borrow funds for share buy-backs, special dividends and
acquisitions than to repatriate and utilize the cash on their balance sheets. For
example, rather than use its $100 billion in cash holdings and pay $9 billion in
corporate taxes for repatriation, Microsoft opted for debt financing to fund its all-
cash acquisition of LinkedIn for $26.2 billion in June 2016.

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Pressuring Tax Havens

To maximize their tax receipts, foreign governments maintain relatively

constant pressure on tax havens to release information regarding their citizens’
offshore accounts. For the efforts to succeed, however, countries trying to get tax
havens to change their ways usually need financial leverage in some form as the
advantages of capital inflows seeking tax relief typically outweigh the benefits that
might be received due to tax compliance.

For example, when the Cyprus’ financial sector built on the country’s tax
haven status collapsed in 2013, the European Commission, European Central Bank
and International Monetary Fund predicated the $11.8 billion bailout on the
country’s agreement for compliance in tax reporting. In addition to increasing its
corporate tax rate, Cyprus agreed to join the Automatic Exchange of Financial
Information in Tax Matters program by 2017. Participating countries automatically
transmit tax-related banking information of noncitizen depositors to their countries
of citizenship to facilitate taxation of income, including earnings, interest,
dividends and royalties.

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South African Breweries

South African Breweries (officially The South African Breweries

Limited, informally SAB) is a major brewing and bottling company headquartered
in Johannesburg, South Africa and was a wholly owned subsidiary
of SABMiller until its interests were sold to Anheuser-Busch InBev on 10 October
2016. South African Breweries is now a direct subsidiary of Anheuser-Busch
InBev SA/NV. The company that is now South African Breweries was founded in
1895 as Castle Brewery to serve a growing market of miners and prospectors in
and around Johannesburg. Two years later, it became the first industrial company
to list on the Johannesburg Stock Exchange and the year after (1898) it listed on
the London Stock Exchange.

In 1950, SAB relocated its headquarters and control from London to South
Africa. In 1955, Castle Brewing purchased the Ohlsson's and Chandlers Union
breweries, and the group was renamed South African Breweries. From the early
1990s onward, the company increasingly expanded internationally, making several
acquisitions in both emerging and developed markets. In 1999, it formed a new
UK-based holding company, SAB plc, and moved its primary listing to London. In
May 2002, SAB plc acquired Miller Brewing, forming SABMiller plc.

History
Brewing in South Africa
Prior to incorporation in the year 1895, Castle Brewery had operations in
Cape Town to serve the steady expansion of a settler community from the mid-
17th century. The demand for beer prompted the first Dutch governor, Jan van
Riebeeck, to establish a brewery at the Fort (later replaced by the Castle in central
Cape Town) as early as 1658 - beating the first wine production by six months. In
the same year, Pieter Visagie brewed the first beer from the waters of the
Liesbeeck River. Over the next 200 years, brewing made its mark in the Cape and

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beyond. Noted brewers of the time included Cloete at the Newlands Brewery;
Ohlsson at the Anneberg Brewery; Jacob Letterstedt at Mariendahl Brewery - also
in Newlands: Hiddingh at Cannon Brewery; Martienssen at the Salt River
Brewery, and a second Cloete in Kloof Street.
One of the key figures in the story of Newlands, and in the annals of South
African beer manufacturing history, was Swede Anders Ohlsson, who sailed for
Africa, aged 23, in 1864. Initially, he imported Swedish goods and timbers, and
developed an extensive trade network and a solid business empire. Then he turned
to brewing, basing himself at Newlands, where he produced Lion Lager. In 1955,
the South African government introduced a heavy tax on beer products causing
many consumers to switch to spirits. However, the subsequent shock to the South
African beer industry proved to be a blessing in disguise for SAB. A year later, the
company purchased its two main competitors, Ohlsson’s and Chandlers Union
Breweries, both of whom were struggling under the depressed demand for beer,
and the group was renamed South African Breweries.
After the acquisitions the new and larger SAB was able to rationalize
operations, thereby reducing costs and increasing profitability. By 1998, SAB
commanded approximately 98 per cent share of the South African beer market and
was considered one of the lowest cost producers of beer in the world. In 1999, after
listing on the London Stock Exchange to raise capital for acquisitions, the group
purchased the Miller Brewing Company in North America from the Altria
Group in 2002, and changed its name to SABMiller.
Within South Africa, SAB distributes beer through its extensive network,
augmented by a fleet of independent truck drivers (called owner-drivers)
comprising mainly former employees, many of whom had received help from the
group to start their own businesses. SAB has invested billions of rands in this
owner-driver project since inception. Although several international brewers, such
as the UK’s Whitbread, had tried to enter the South African market, all had thus far
failed to gain significant market share. From time to time, new startups also tried to
challenge SAB’s monopoly, but these had either gone out of business, or been
acquired by SAB. A case in point was National Sorghum Breweries (NSB), "a
black business consortium" founded in 1990, and the first new player in the beer
industry in more than 10 years. "SAB’s supremacy is under threat," observers said,
and some thought that within a few years NSB could achieve 10 per cent market
share. Instead, the company ran into financial difficulties and failed to gain any
significant share of the market.
This does not mean that SAB’s position could never be threatened. In 2004,
a new company was established in South Africa known as brandhouse through a

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joint venture of Diageo, Heineken and Namibian Breweries. brandhouse started

marketing, selling and distributing some of the world’s top premium brands such
as Heineken and Windhoek and in March 2007, the 40-year agreement between
SABMiller plc and Heineken N.V. which allowed SAB Ltd to brew and distribute
Amstel Lager in South Africa, was terminated, sparking a new era of competition
for the industry. At the same time, Heineken announced its intention to build its
own brewery in South Africa. SAB Ltd launched a new premium brand, Hansa
Marzen Gold shortly thereafter and continued its expansion into premium brands
with the launch of Dutch heritage beer, Grolsch, following SABMiller’s
acquisition of Koninklijke Grolsch N.V. in early 2008. Dreher Premium Lager was
launched in South Africa the same year, and the company has made a number of
innovations in the spirit cooler and apple-ale categories in recent years.
On October 2016, Anheuser-Busch InBev acquired the entire SABMiller
company which then became a business division of Anheuser-Busch InBev SA/NV
and ceased trading on the worldwide stock markets.[14][15] As a result, South
African Breweries and Carlton & United are now owned by Anheuser-Busch
InBev SA/NV.[30]
Soft drinks
In 1925, SAB expanded into other beverages after purchasing a large share
in Schweppes (soft drinks). In 1960, the group purchased a controlling interest in
Stellenbosch Farmer’s Winery, which, along with Distillers Corporation,
contributed R98 million to group earnings in 1997.
1997, SAB subsidiary, Amalgamated Beverage Industries, purchased
another Coca-Cola bottler, Suncrush, thereby doubling market share to
approximately 60 per cent of South African soft drinks. PepsiCo, SAB’s only
competitor, withdrew from the market in 1997 resulting in the liquidation of Pepsi
franchisees. Pepsi, however, re-entered the South African market in 2006.
In December 2004, SAB Ltd acquired 100% of Amalgamated Beverage
Industries Limited (ABI), which became the soft drink division of SAB Ltd, and
the largest beverage company in South Africa was created.

Plate glass

In 1917, the group began to venture into unrelated businesses when it agreed
to take over a failed glass manufacturer, Union Glass, to counter the acute shortage
of bottles during World War I. In 1954, Union Glass merged with Consolidated

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Glassworks and this business was sold off in 1960 to Anglovaal Industries. The
company became an important player in international glass manufacturing when it
acquired the Plate Glass Group in 1992.
The Plate Glass Group traced its roots to a British immigrant and
entrepreneur who, in 1897, established a plate glass manufacturing operation
in Cape Town, South Africa. Eventually the company became a leading producer
of safety and bullet-proof glass for automobiles. In 1987 the company launched a
new subsidiary in the United States in partnership with SAB and Anglo American.
When Glass medic, a US-based windshield repair and replacement company, was
acquired in 1990, the South African parent company merged the subsidiaries under
the name Belron International. Belron became a base from which to launch further
acquisitions. When SAB purchased Plate Glass in 1992, it was renamed
Shatterprufe Limited.
Belron had by 1998 become the world’s leading producer of automotive
replacement glass, with some 1,865 retail outlets in North America, Europe,
Australia, and Brazil. Growth had come mainly through acquisitions. In 1997,
Belron acquired several leading brands, including Standard Autoglass in Canada,
thereby becoming "the largest player in the North American Markets." Worldwide
market share was on the order of 18 %, and SAB envisioned further expansion in
the coming years:
In Europe, Belron was opening an average of 12 new outlets per month.
While sales had increased by five per cent in 1997, earnings had declined eight per
cent to R255 million as a result of the borrowing costs associated with new
acquisitions and expansion.
Recognising the need to enhance long-term shareholder value, in 1997 SAB
returned to its core beverage business, locally and internationally, selling off or
closing non-core operations over the next few years. Amongst these was the Plate
Glass business.
Entertainment and hospitality
Although SAB (then called Castle Breweries) had established the first pub in
South Africa in 1896, it did not begin to invest heavily in service industries until
1949 when an aggressive expansion thrust saw some £4.5 million invested in
hotels and pubs, as well as additional brewing facilities. In 1969, these interests
were merged with a hotel chain owned by Sol Kerzner, to form a separate
subsidiary known as Southern Sun Hotels. Kerzner remained with Southern Sun as
its managing director for several years thereafter. In 1983 Kerzner left SAB, but
remained a significant shareholder in the company.

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Southern Sun eventually grew to become the leading hotel chain in South Africa,
with franchises awarded by Holiday Inn and Inter-continental Hotels. By 1998, this
subsidiary owned 74 hotels with 12,200 rooms, or about 22 per cent of industry
capacity. Southern Sun also maintained a minority interest in an eco-
tourism company.
Development of new hotels depended on securing licences from the
government, "as the state still owned large tracts of land in both urban and rural
areas." Suitable locations for hotel and resort development were very limited, and
local government officials often did not have the training and expertise needed to
make informed decisions about the granting of such licences. Resulting delays
resulted in significant costs.
Several international hotel chains decided to enter South Africa after the
lifting of economic sanctions. By 1998, numerous hotels were under construction
by Hyatt, Sheraton, Howard Johnson's, Days Inn, Hilton, Best Western, Concorde
(France), Le Meridian (France), and Relais de Chateau (France), among others.
Most new hotel development was in the executive and luxury segments of the
market. In less than four years, industry-wide capacity had more than doubled, and
as a result, the hotel industry began to experience significant over-supply.
Combined with a weak currency, this translated into some of the lowest room rates
in the world.
Although escalating levels of violent crime had been a serious constraint for
South African tourism, Southern Sun had been able to maintain an average
occupancy above 70 %. In 1997, hotel earnings increased by 16 % over the
previous year to contribute R182 million to group earnings.
The government introduced the National Gambling Act in 1996, which
allowed for up to 40 casino licenses to be issued to "financially competent
operators." In 1997, SAB entered into a joint-venture with Tsogo Sun Gaming and
Entertainment to establish up to eight casino resorts to be completed as early as
2000. Monte Casino was the first of these developments to be completed at an
expected construction cost of $US250 million.
The most notable black empowerment transaction facilitated by SAB was
Tsogo Investments in early 2003. The transaction, which had an implied value of
approximately R1.9-billion, meant that empowerment group Tsogo Investments
acquired control of Southern Sun Hotels, then the largest hotel group in southern
Africa as well as Tsogo Sun, a leading casino operator in South Africa.

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Other manufacturing and retail

Further diversification came in 1967 with the establishment of a new
subsidiary known as Food Corporation (coffee, tea, and food products). An even
larger diversification push was undertaken in the 1970s and 1980s, when the SAB
group of companies purchased or established numerous unrelated operations
including grocers (OK Bazaars), furniture factories and stores (Associated
Furniture Company), shoe factories and stores (Shoecorp), and clothing stores
(Scotts Stores and Edgars Fashion Group). In 1996, more than 20 % of SAB’s
workforce was employed in these companies.
Changes in consumer preferences towards less expensive goods had a
negative effect on the premium retail market in the mid-1990s. SAB off-loaded the
OK Bazaar grocery chain in 1997 for one rand, after losing nearly R20 million per
month. And at the beginning of 1998, the Clothing and Footwear, as well as the
furniture divisions were also sold. Later SAB also sold its 21% minority stake in
Edgars Fashion Group in 2004.[31]
SAB no longer holds any manufacturing or retail assets.

International expansion

The company’s earliest international venture was in 1910 when it founded

Rhodesian Breweries in Southern Rhodesia, now Zimbabwe. This subsidiary
spearheaded SAB’s initial international expansion efforts, having established new
breweries in Northern Rhodesia, now Zambia and Bulawayo, Southern Rhodesia,
in the early 1950s. Further international expansion came in the 1970s and 1980s
with the establishment of breweries in Botswana, Angola, and the buying
of Compañía Cervezera de Canarias of the Canary Islands. Nevertheless, prior to
1990, SAB remained primarily focused on domestic opportunities.
In 1994, SAB was invited to revitalise the beer industry in Tanzania, a joint
venture with that country's government in Tanzania Breweries Limited, and to re-
enter the beer markets of Zambia, Mozambique and, later, Angola. This followed
one of its first foreign investments into the Canary Islands. Expansion continued
into Africa in the 1990s and on other continents into Hungary (1993), China
(1995), Romania, Poland (1995–96), Slovakia (1997), and Russia (1998), the
Czech Republic (1999), India (2000) and Central America in 2001.
The group’s expansion into Asia started with its 1995 negotiation of joint control
of the second-largest brewery in mainland China with China Resources, a

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privatisation arm of the government of the People's Republic of China. Further

investments included those in the Harbin Brewery Group and the Fuyang City
Snowland Brewery. In 2000 SAB plc entered the Indian market where it has
subsequently increased its commitment.
By 2001, turnover from SAB plc's international operations accounted for
42% of group turnover. The same year, a pan-African strategic alliance with the
Castel group offered the opportunity to invest in promising new African markets
and the benefits of scale economies.
Involvement in Central and South America started in 2001 with the
acquisition of Honduran and Salvadoran breweries. This was followed four years
later by the purchase of a major holding in Grupo Empresarial Bavaria, South
America’s second largest brewer.
One of its largest transactions was with the Miller Brewing Company in the
US in 2002, whereupon the listed company changed its name to SABMiller plc.
By the end of March 2009, SABMiller produced global lager volumes of 210
million hectolitres, with total group revenues of US$25,302 million.
On 10 October 2016, Anheuser-Busch InBev acquired SABMiller for £69
billion.[7] The arrangement had been approved by shareholders of both companies
on 28 September 2016, and the deal closed on 10 October 2016. The acquisition,
subsequently referred to as a merger in the news media, ended the corporate use of
the name SABMiller. The new company is called Anheuser-Busch InBev SA/NV,
(AB InBev) and is trading on the Brussels Stock Exchange as ABI.BR and as BUD
on the New York stock exchange.[32] [32] SABMiller ceased trading on global stock
markets and divested itself of its interests in the MillerCoors beer company to
Molson Coors.
After acquiring SABMiller, Anheuser-Busch InBev SA/NV agreed on
December 21, 2016 to sell the former SABMiller Ltd. business in Poland, the
Czech Republic, Slovakia, Hungary and Romania to Asahi Breweries Group
Holdings, Ltd. for US$7.8 billion. The deal includes popular brands such as Pilsner
Urquell, Tyskie, Lech, Dreher and Ursus.
SABMiller was one of the world’s largest Coca-Cola bottlers and had carbonated
soft drinks bottling operations in 14 markets. These were subsequently owned by
the new Anheuser-Busch InBev SA/NV entity which is also a PepsiCo bottler. In
December 2016, Coca Cola Co. bought the Coca Cola operations in Africa and in
two Central American countries. The deal requires regulatory approval and should
close by the end of 2017.

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Controversy

In March 2014, the Competition Tribunal found that the South African
Breweries (SAB) did not engage in any anti-competitive behaviour following a
case of alleged anti-competitive behaviour brought by the Competition
Commission which was heard by the Tribunal between 2010 and 2013. The case
was the result of an investigation into allegations related to SAB’s distribution
system and pricing activities between 2004 and 2007, with the allegations having
been referred to the Competition Tribunal in 2007.
Throughout the trial, the company maintained that none of its practices were
in breach of the law and that it had not engaged in any anti-competitive behaviour.
It note that “SAB has structured its business to serve retailers and consumers and
strongly believes that all businesses have the right to distribute their products in the
manner that best serves their needs…”
The case was in the public domain for several years, having been referred to
the Competition Tribunal in 2007 by the Competition Commission after a three-
year investigation between 2004 and 2007. The original complaint lodged by Big
Daddy’s head Nico Pitsiladis with the Competition Commission alleged that SAB
charged the Big Daddy’s group as a wholesaler the same price as the company
charged to retailers, thereby preventing Big Daddy’s from earning a fair margin on
its sales to retail.
The case that was presented by the Competition Commission before the
Competition Tribunal related to SAB’s distribution system; an alleged practice of
minimum resale price maintenance; an allegation of price discrimination and
broad, diffuse allegations relating to abuse of dominance. The abuse of dominance
allegations were previously separated from the “distribution” case and may
proceed separately although the Commission has taken no further steps on this part
of the case.
SAB applied in 2011 to have the case dismissed, arguing that the case
presented to the Tribunal was not the same as the original complaint laid by the
Big Daddy’s group in 2004. This was upheld by the Tribunal in April 2011.
Following the Tribunal’s dismissal of the case in April 2011, the
Competition Commission applied to the Constitutional Court for direct access to
the Constitutional Court, bypassing both the Competition Appeal Court and the
Supreme Court of Appeal. In December 2011, the Constitutional Court handed
down a decision in which it dismissed, with costs, the Competition Commission's
direct access application.

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The Commission subsequently filed an appeal with the Competition Appeal

Court, which was heard on 13 September 2012. In November 2012, the
Competition Appeal Court announced it had upheld the Commission’s appeal and
set aside the Tribunal’s ruling. This resulted in the resumption of the
Commission’s case against SAB, which was heard before the Tribunal in July and
August 2013.

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