Jakarta Globe –AFP, Nov 06, 2014
Washington. Hundreds of the world’s biggest companies have brokered secret deals with Luxembourg to avoid paying billions of dollars in taxes according to a trove of leaked documents published by an investigative journalism group on Wednesday.
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| Cases of Pepsi are displayed for sale in Carlsbad, California in this file photo taken February 7, 2012. (Reuters Photo/Mike Blake) |
Washington. Hundreds of the world’s biggest companies have brokered secret deals with Luxembourg to avoid paying billions of dollars in taxes according to a trove of leaked documents published by an investigative journalism group on Wednesday.
The
US-based International Consortium of Investigative Journalists (ICIJ) said a
six-month investigation had found household firms such as Pepsi, IKEA and
Deutsche Bank were among companies which had taken advantage of legal tax
avoidance schemes with Luxembourg.
The ICIJ
said it had reviewed around 28,000 pages of leaked documents which detailed
complex financial structures that enabled companies to dramatically slash their
tax liabilities.
The
organization said hundreds of billions of dollars had been funneled through
Luxembourg as part of the agreements, wiping billions of dollars in taxes from
the companies’ bottom lines.
Global
accounting giant PricewaterhouseCoopers had helped the companies in question
secure at least 548 tax rulings in Luxembourg between 2002 and 2010 according
to an ICIJ analysis of the documents.
The
documents uncovered details of Advance Tax Agreements – deals which set out how
companies will be taxed.
“It’s like
taking your tax plan to the government and getting it blessed ahead of time,”
the ICIJ quoted Connecticut School of Law tax expert Richard Pomp as saying.
“And most
are blessed. Luxembourg has a very user-friendly tax department.”
The ICIJ
said its investigation had involved a team of more than 80 journalists from 26
countries working for outlets including The Guardian, Le Monde and Germany’s
Suddeutsche Zeitung.
‘Magical
fairyland’
The
Guardian said in its report of the investigation that the arrangements forged
between the companies and the tiny EU member state were “perfectly legal.”
But it said
the agreements were enabling tax avoidance on “an industrial scale.”
Other
companies that benefited from the schemes included Burberry, Procter &
Gamble, Heinz, JP Morgan and FedEx.
The ICIJ
said some companies had been able to achieve effective tax rates of less than
one percent on profits channeled through Luxembourg.
It said
many cases involved Luxembourg subsidiaries of the companies in question, even
if they maintained only a marginal business presence in the country. It said
1,600 companies were registered at one address alone.
The
Guardian quoted US Treasury tax expert Stephen Shay as saying Luxembourg was
akin to a “magical fairyland.”
“Clearly
the database is evidencing a pervasive enabling by Luxembourg of multinationals’
avoidance of taxes [around the world],” said Shay, a Harvard Law School
professor who gave expert testimony during a US Senate investigation last year
into Apple’s tax avoidance structures.
The
revelations come against a backdrop of mounting scrutiny by authorities
worldwide of tax arrangements involving major firms.
Last month,
the EU snagged Internet titan Amazon in a widening probe into sweetheart tax
deals for major multinationals, saying they were unfair to competitors and
taxpayers.
The move
follows similar probes announced in September into US tech icon Apple in
Ireland, coffee-shop chain Starbucks in the Netherlands, and the financial arm
of Italian automaker Fiat, also in Luxembourg like Amazon.
European
Union anti-trust regulators will examine if Amazon’s tax arrangements with
Luxembourg amount to illegal state aid, giving the company an unfair advantage.
Agence-France Presse
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