Tax evasion: 107 million euro fine against British American Tobacco in the Netherlands

In the Netherlands, tobacco giant British American Tobacco has been fined €107 million. The tobacco company is accused of under-declaring its profits by €1.8 billion between 2013 and 2016.

According to the Northern District Court of the Netherlands, the largest part of the fines imposed on British American Tobacco was due to an intentionally false declaration of a transfer of activities to the United Kingdom. For its part, the tobacco manufacturer said the court decision was "disappointing", stressing that it was considering appealing.[1].

A year of heavy sanctions for British American Tobacco

This court decision against British American Tobacco is not the first of 2023. In April, the cigarette manufacturer admitted to the US courts its guilt in setting up a Illicit tobacco trade in North Korea for ten years. Through an elaborate system of shell companies, the manufacturer was able to continue its activities, generating approximately $418 million in the country. It was shown that these activities generated nearly €700 million for manufacturers owned by the North Korean state and the North Korean military. The cigarette company was thus fined $635 million, the largest sanction against North Korea in the history of the US Department of Justice.

Tax evasion at the heart of the tobacco industry's strategy

In 2020, a study conducted by the Investigative Desk (a cooperative of investigative journalists) and the University of Bath, already highlighted the tax evasion practices of the main tobacco manufacturers: British American Tobacco, Imperial Brands, Japan Tobacco International and Philip Morris International. The report then highlighted the central role of the Netherlands, to which the tobacco giants transferred 7.5 billion euros of their global profits annually, then transferred back to holding companies in the United Kingdom, Switzerland or Japan. The investigation also showed that British American Tobacco had transferred one billion euros of profits to Belgium, taxed at less than 1% in the country. Along the same lines, other tax avoidance strategies were practiced by tobacco companies, such as the deduction of notional interest, the transfer of profits via intra-company transactions, or the reduction of group taxes. British American Tobacco paid almost zero euros in UK corporation tax, report findsIn 2013, the National Committee against Smoking helped prepare a Cash and Investigation devoted to tax evasion by cigarette manufacturers. The Journal du Dimanche had revealed in particular that manufacturers declare a pre-tax profit of some 50 million euros per year, while their real profit would in fact be around one billion euros.

These practices of circumvention or even tax evasion by manufacturers must be compared with the financial burden that smoking represents for public authorities, but also for the community at large. In France, in 2019, the net social cost attributed to smoking was estimated at 156 billion euros.

Keywords: tax evasion, Netherlands, British American Tobacco

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[1] Reuters, Dutch court orders British American Tobacco to pay $117 mln fine, back taxes, 12/15/2023, (accessed 12/19/2023)

[2] The Investigative Desk, Big Tobacco, Big Avoidance, 04/11/2020, (accessed 19/12/2023)