LONDON Associated British Foods (ABF.L) denied any "illegal or immoral" activities aimed at avoiding tax after an international charity said the British firm had moved profits out of Zambia to reduce its tax bill.
ActionAid said Zambia Sugar, a unit of FTSE 100 company AB Foods, had made profits of $123 million since 2007 but had paid "virtually no corporate tax" in Zambia.
It also said in a report entitled 'Sweet Nothings' that the owner of the Twinings tea and Silver Spoon sugar brands had found legal ways to move $83.7 million, or a third of the unit's pre-tax profits, out of Zambia to avoid tax.
AB Foods said in a statement on its website on Sunday that 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."
The UK company, which also owns clothing retailer Primark, said it does not engage in aggressive tax planning in Zambia.
"the group has an open and transparent relationship with all the tax authorities in the jurisdictions in which it operates," the statement said.
For the year ending 31 March 2012, the unit's effective tax rate was 30.3 percent according to AB Foods. The group has paid 120 million pounds ($190.04 million) in taxes over the last five years and collected another 180 million pounds in employment and sales taxes, it said.
ActionAid responded by saying it was standing by its report.
"None of (AB Foods') arguments seem to stack up or tell the whole story," said Chris Jordan on Sunday, a co-author of the report which concluded a year-long investigation.
Tax avoidance by corporations legally channelling profits between international subsidiaries, a mechanism known as transfer pricing, has become a hot political issue with firms like Starbucks (SBUX.O), Google (GOOG.O) and Amazon (AMZN.O) facing protests and political pressure.
(Reporting by Chris Vellacott; Editing by Elaine Hardcastle)