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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.
After a six-month investigation the US-based International Consortium of Investigative Journalists (ICIJ) 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 Irish Times published some of the documents last night and reports that Irish food multinational Glanbia put about €1 billion into Luxembourg based companies that had no employees.
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 organisation 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.
Headquartered and managed in Ireland, Glanbia today said that it has an effective corporation tax rate of 17% on its worldwide earnings.
“The majority of the Group’s 2013 corporate tax payments were made to the Irish exchequer,” it continued. “The Group is tax compliant in all of the jurisdictions in which it operates.”
It has group companies in Luxembourg which it says are “part of inter-group financing arrangements underpinning our international operations”.
“These are clearly identifiable as Glanbia companies. The Group is cognisant of its obligations under Irish and international tax law and is fully committed to compliance and reporting requirements in all jurisdictions in which the Group operates.”
© – AFP 2014 with Sinéad O’Carroll
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Can I funnel my tax through Luxembourg?
Yes if you have a Luxemburg registered limited company – however you would need to be very careful regarding legislation in your country of residence (Ireland I assume).
.
Basically, what you need is your Irish Limited Company which will employ you and pay a minimum wage and your Luxemburg Limited Company which will invoice the Irish company for services rendered (assign all of your accounting to Luxemburg).
.
That’s basically it in a nutshell, but the cost/savings analysis makes it relatively unproductive for a sole trader of services (labour).
… and what about the Journals Luxembourg roots .
we still haven’t got to the bottom of them yet
Sorry, Dave – but what are you talking about??
Don’t take the bait Susan !!
Thanks Frank, but I’ve heard this question a few times (most recently shouted at one of my colleagues as he covered a water charges protest) and I’m trying to get to the bottom of it.
Journal Media Ltd is an independent company which is funded solely by the two brothers, Brian and Eamonn Fallon.
We have never been to Luxembourg, although I believe Dudelange is beautiful this time of year.
Susan, The Journal is an independent company?
With the amount of pro-SF comments, you’d think it was the English language version of An Phoblacht.
By the way, if you use the word “independent” they’ll think it is part of the “billionaire DOB FG donor media empire evil death star” :-)
Ah Susan!!! you are a journalist who claims she wants “to get to the bottom of the Luxembourg links” Tiger Holdings Five SARL should help your stonewalled investigation.
Let me repeat it one more time for you in the back there, Peter.
Journal Media Ltd has zero investment from anyone other than Brian and Eamonn Fallon.
The facts – should you wish them to come in the way of your conspiracy theories – are there in black and white in our company records, publicly available from the CRO. Check them out.
Hi Susan. Looks like he was very much right. Whilst you may never have been to Luxembourg, I think that the owners of your parent company do regularly.
http://www.irishtimes.com/business/economy/irish-companies-linked-to-further-luxembourg-tax-disclosures-1.1991514
Hi Diarmuid,
The Irish Times is totally erroneous on that score – they have not checked the company records at all. TheJournal.ie has nothing to do with that investment group, and never has been.
We are currently speaking to the Irish Times about a clarification and removal of this false information.
I have no idea why their experienced reporters have not bothered to check the CRO, but if they had, the information would be there for them.
Thanks, Susan
I did point out the parent company connection in my msg to you after my twitter account was somehow no longer able to post comments. At least my name has been cleared as a “conspiracy theorist” and actually someone who knows a bit about the finance/business world. Personally as the Journal is a 100% subsidiary of Distilled Media and it’s Distilled media that has the fund backers in Luxembourg I think the I Times are correct in what they report. But that’s just my take
It absolutely is NOT a subsidiary of Distilled Media – AND the Irish Times have been forced to remove their erroneous reference to TheJournal.ie in that article today.
Check the link you yourself posted, and then stop repeating untrue statements, thanks.
Fat cat wallets getting fatter and households getting shafted.
The mind boggles.
All companies based here should pay here or fcuk off
And who would you work for then?
C’mon Daniel, where will they flock to?
Has anyone found the theme of today’s news ‘Blame Ireland and they’ll take the fall lying down’ it’s time we stood up to the EU and say simply enough is enough.
to be fair, thes corporate tax loopholes should never been created in the first place and the EU should keep the pressure on the gov’t to close all other loopholes and tax anomalies.
How is that ‘to be fair’???
Ireland should have refused to close the Double Irish until there was a written commitment to close tax loopholes throughout Europe.
A worker paying 51% while a corporate paying 2% is ok? Something wrong there. To my knowledge, no other European country (apart from Ireland) allows this. The point was that Adam apparently thinks it’s okay to keep these corporate tax loopholes (which the worker is subsidizing through higher taxes) while new taxes are being imposed on people elsewhere.
ITS,
You have very limited knowledge…
We are the only country that has the lowest effective corporate tax rate in Europe.
ITS,
What are the rates in Cyprus(12.5%), Bulgaria(10%), Macedonia(10%), Montenegro(9%)….
And while we are talking about other peoples money….
We tax our poorest the lowest and our richest some of the highest…
http://www.taxinstitute.ie/Portals/0/Effective%20Income%20Tax%20Rates%20Ireland%20v%207%20competitor%20countries.pdf
Ah, here now, Cowboy Ted, don’t you know the comments section is not the place to bring up facts. It is, rather, the place to bring up all sorts of made up stuff starting with “I’m sure…”, and “probably….”.
Go and take your well researched facts somewhere else, please. Honestly, the nerve of some people.
Sorry Chin, will never do it again…
Feel stupid now, Didn’t know actual popular opinion…
So how do corporations pay effective 2% corporation tax in Ireland? There are Irish tax loopholes that were created by successive governments. These are the problem – not other countries. Therefore, the EU (and others) should keep the pressure on this government to bring these into line with other countries.
Transfer pricing, Patent Royalties, Subsidiary rules should be changed, to name a few. A corporation setting up in Ireland for “R&D” purposes gets a tax break – something very wrong with the Irish tax code.
Just read that report Cowboy Ted, Cowboy is right. The report only compares to “competitor” countries. Ie. Hand picked countries designed to fabricate a point. This report has all the hallmarks of bias and cherry picking of stats
Thank you for telling us journal investigating team. Good work there.
We already know companies avoid tax in perfectly legal ways and perhaps it is more than time to change the legal system.
People paying taxes is so much easier for the rich and they should not be having tax relief but the poorer sections of communities should.
I think this pursuit of money, this wild greed has become worse than ever and these people have no conscience for what they do is at the expense of others where a very small amount of money is critical.
These miserly hoarders could not even touch the interest in 500 lifetimes….are they ill with greed?
It’s an AFP article.
What hate i about this is very few out ther beleave or see the con we living,
We are all working our backs off paying taxes, all long side other chagers.
Our govermets say we need the money to pay for & improve services.
This a con so these big compaines don’t have to pay up.
We need to forget water protest we need.
FAIRER TAX PROTEST
If these compaines paid just a little more, over night our whole country could have better health care, water, education, quailty of life ect….
All of us workers wheater you student, middle class worker, or earning a bit more.
All our tax rates could be cut, thus releaseing more free money into our economy which would help make more jobs, reduce crime, sucides, stress. And goverments, bankers, big corps would still make.
But no it cant be cause the modren world dose like a fairer system.
Maybe some day if more people relize…
JustMade, what was that? Something about tax, blah, blah. Too many spelling and grammar errors, almost impossible to read.
This is why spelling is important.
So what is your life that pathetic like so many out that you have to troll the internet to pick on someone with a learning disable, “ just to make yourself sound important.
Would you say to someone who cant walk properly, this is why walking is important!!
Burned!
JustMade, you see? You can spell correctly when you make an effort. It’s not that difficult, especially with modern technology.
Owned.ie
Don’t tell the French government
Don’t tell the vested interests who oppose paying their fair share of tax.
This is why Ireland should support tax harmonisation in Europe and financial transaction taxes.Even the 12.5% was too onerous for these corpoations understandably as a corporations only motivation (despite p.r. guff about corporate citizenship etc) is profit.they must be strictly controlled by governments or we become slaves to them.
To late. We are slaves to them already.
Tax harmonisation simply does not work when you have so many varied economies. The idea of currency harmonisation has already proven to be a bust as the EU has so many different economies with their own strengths and weaknesses.
Tax harmonization is a good idea because it would mean more money for public services when corporates have nowhere to hide. It would also enable better health services, social programs, road building, public transport, etc.
Buy Irish, support Irish jobs. Love Irish food! Thank you for supporting Irish. Now we are going to filter the money through Luxembourg to avoid paying tax in Ireland. Thank you. Glanbia.
The keyword in the article is legal
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