See: http://bharatkalyan97.blogspot.in/2014/11/kaalaadhan-luxembourg-corporate-tax.html
Last updated: November 6, 2014 11:29 am
Last updated: November 6, 2014 11:29 am
Leak reveals scale of corporate tax deals with Luxembourg
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Leaked documents describing the Luxembourg tax arrangements of more than 340 multinationals were published on Wednesday, stoking the debate over the allegedly favourable tax deals offered by the Grand Duchy.
The International Consortium of Investigative Journalists, a global network based in the US, said it had examined nearly 28,000 pages of leaked documents that laid out special tax deals granted by the Luxembourg tax authorities to some of the world’s largest corporations.
It said its findings showed how hundreds of companies had funnelled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes.
It said: “In some instances, the leaked records indicate, companies have enjoyed effective tax rates of less than 1 per cent on the profits they’ve shuffled into Luxembourg.”
The confidential documents mostly concern clients of PwC, the professional services group, which ICIJ said had helped multinational companies obtain at least 548 tax rulings in Luxembourg from 2002 to 2010. The documents are mainly Advance Tax Agreements, which are rulings setting out the way the businesses will be taxed.
The ICIJ, which worked with 80 journalists and outlets including The Guardian, Le Monde and Germany’s Suddeutsche Zeitung, reported that PwC said the reports were based on “outdated” and “stolen” information, “the theft of which is in the hands of the relevant authorities”.
The ICIJ also said the arrangements were “legal” under Luxembourg law and that some corporations would have sought comfort letters from Luxembourg for reasons other than tax avoidance.
Some of the documents in the leak were reported in 2012 by French journalist Edouard Perrin for France 2 and by the BBC. But the majority of the files have never been examined before. Mr Perrin said the documents were “the same secret tax agreements Luxembourg only reluctantly and very partially released when summoned to do so by the European Commission, which is currently investigating the use of tax rulings as a possible illegal state aid”.
The commission is probing whether rulings agreed by the Luxembourg tax authority with Fiat, the car company, and Amazon, the ecommerce company amounted to improper state aid. The cases are particularly sensitive because Jean-Claude Juncker, the new commission president, was premier of the Grand Duchy at the time of the deals. All the countries and companies subject to the state aid probes reject any improper arrangements or wrongdoing.
The revelations have already prompted calls by Mr Juncker’s political opposition in the European Parliament, the centre-left Socialists, to explain whether he continues to stand by the Luxembourg tax system.
“As the new president of the European Commission, the credibility of Jean-Claude Juncker is on the line,” said Gianni Pittella, the Italian MEP who heads the Socialist group in parliament. “He must show whose side he is on. Is he on the side of European citizens or corporate tax dodgers?”
At a news conference Wednesday, before the ICIJ investigation was published, Mr Juncker said he would leave the tax inquiry to the commissioner in charge of investigating possible state aid violations – Denmark’s Margrethe Vestager, the new competition commissioner – and vowed not to interfere.
“The commission will do its work, I will not get involved in this,” Mr Juncker said. “It is the duty of the competition commissioner, who must be given great freedom of action and comment. I will not stand in the way, that would be unacceptable. I have some ideas on the topic but I’ll keep my counsel.”
A European Commission spokesman declined to answer questions about Mr Juncker’s role in the tax schemes approved by the Luxembourg authorities while he was prime minister, saying such questions should be directed to the current Luxembourg government.
Asked how Mr Juncker responded to the revelation, the spokesman, Margaritis Schinas, said: “Mr Juncker is serene.”
Additional reporting by Peter Spiegel in Brussels
Luxembourg is indeed a rogue state and one can only see the lengths they go to to stop any investigation into false accounting . anything goes; threats, blackmail, intimidation, lies, refusals to look at any evidence and seizing property from clients who were creditors. Luxembourg can only be called Europe's septic tank.
What did Juncker do and what promises did he make so the countries would vote him in, when they did not really want him as President of Europe? That is an interesting question.
I hope that this is just the start of the exposure of Luxembourg as a rogue state where the judiciary is run to suit the Duchy and the chances of justice through the courts is nil. I see that No2 Fraud has written about the Landsbanki scam that the administrator has refused to investigate this is yet another example of the corruption that exists there.
Basically the Landsbanki customers wanted more interest. More interest means more risk, including bankruptcy.
I can understand the rage and envy by overtaxed citizens against those who manage their affairs in a legal "tax efficient" way. But should they not address at least some of their rage at their governments who overtax them and overspend?
Low corporate tax rates in havens or with loopholes are not such a loss as it is made to appear: They result in higher after tax profits for the corporation which will eventually be distributed as higher dividends to their shareholders, each of whom will pay higher taxes to his tax jurisdiction.
The real argument should be about what percentage of GDP should be spent by government.
Luxembourg knows where to position its tax rates on the Laffer Curve to maximise income. Some bigger states in the EU pick a rate based on Envy, or in the mistaken belief companies cannot or will not move their profits elsewhere.
J-C Juncker will have a good answer.
You don't think so ! ?
Come on ! He got this far, didn't he ?
He was fired from Luxembourg and became President of EC !
Yeah! Jean-Claude will fix it ! EC has talent !
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I thought that was the whole point of Luxembourg, a place to dodge taxes (which I am reminded of every time I look at an Amazon/Ebay etc etc bill).
Tax law is a classic example of divide and conquer, corporations being the new Emperors
Very bad start for this new European Commission and Junker .
This is a big no-no ... but in Europe people seem to "swallow" everything. If the EU does nothing about this ... than EU is truly dead.
Lets wait and see
Is the EU trying to show off its control failings in order to ensure the UK leaves the EU ? My own answer is yes.
Let us listen to Francois Hollande's address to his nation tonight and hear if he has a reform in mind to curb corporate tax avoidance. He's gone a long way to curb tax avoidance for individuals. Here's his chance to do the same on corporates, be they French ones or other Europeans. In case he is not aware, such corporate tax reform might aid his country's gaping deficit. Their tax avoidance has not made their companies more competitive.
yes but let's keep in mind that tax avoidance exists as well because of excessive taxation: greed AND excessive taxation are an incentive to seek tax avoidance.
Taxes are not holy on their own, beyond a given level they are simply an abuse by the state
Taxes are not holy on their own, beyond a given level they are simply an abuse by the state
@Lino @Kestrel I agree with you. But only so far, and definitely not to the low level in Lux of paying just 1% on corporate profits.
It is a shame thta in the heart of Europe there is a country making fiscal dumping for the rest.
There should be ONE TAX REGIME FOR ONE EUROPE
By the way, there are no links between multinational and politicians nearby??
@madmax There isn't 1 tax regime in your country (I am absolutely sure, wherever you are) and certainly not in the 1 USA.
@madmax
Do not stop to taxation, but carry on with social security benefits, pension benefits, ect. Ask the French if they want the same system as in the UK or Germany or Greece.
Do not stop to taxation, but carry on with social security benefits, pension benefits, ect. Ask the French if they want the same system as in the UK or Germany or Greece.
Taxation is the tip of the iceberg but very easy and popular to lash out.
Bring taxes evrywhere to the highest level (yes, politicians tends to love spending more of voters' money who do not see it), it will not solve competitiveness issues.
taxation is at the bottom of the income statement, deductions for social benefits and pensions are at the top of the income statement, hence key to competitiveness (cf France).
Bring taxes evrywhere to the highest level (yes, politicians tends to love spending more of voters' money who do not see it), it will not solve competitiveness issues.
taxation is at the bottom of the income statement, deductions for social benefits and pensions are at the top of the income statement, hence key to competitiveness (cf France).
Listening to one of the investigative journalist last night he repeated at least 5 times that there was nothing illegal done. Many countries have advanced rulings and all countries will do their utmost to ensure that companies locate in their countries. Some are simply more clever and better organised than others. I should surprise nobody.
@L53 Corporate and hi net worth individual tax avoidance does not surprise me. It is the amplitude and general acceptance of it which grates. There exists no level playing field, except for those able to avail themselves of fiscal legal advice. Tax avoidance by corporates magnifies their earnings to the benefit of shareholders, but to the detriment of a country's deficit, and therefore on the tax burden borne by individuals. A clever fiscal lawyer will soon drive a bus through avoidance and champion that it's all about wilful evasion.
Read what I wrote in Sept. of this year to an old girlfriend when discussing NOT is Europe a good idea but rather could we please find someone capable of running it both cleanly and sensibly.
As if these were not indictments enough there's their choice of Junkets-all-round aka Lush 'em boy to run the show, who finds himself heading a commission at odds with his own country's ( Luxembourg) tax indulgencies to amongst others Fiat's banking arm. I'm sure I needn't tell you who introduced these policies when practising to misrule Europe for 25 yrs as finance/prime minister of a country with a population not much bigger than Wolverhampton before being retired under a financial cloud to go on to arguably greater things, but certainly a better pension than Croesus. Tusker has just increased his salary by a mere 500% on leaving Poland to be joined at the hip with Junkets.
Why would I want to be a part of such a corrupt organisation like the European Union ?
7bn Euros improperly paid out. Tax fiddling in Luxemburg , Ireland and Switzerland on a gargantuan scale. The European Budget has never been signed off by the Auditors.
I want out of the European Union. All we need is a simple trade agreement then we can control immigration , balance our own books , and punish wrong doers through our own courts without some corrupt European getting involved .
@GOBSMACKED01 And I'd like it to be sunny every day with hula girls at every street corner. Unfortunately we all have to live in the real world.
For starters, perhaps have a look at how the UK joined the EU, how it has evolved since and look at the UKIP crooks that want to achieve your last paragraph. They misuse and abuse your tax money by not being present in the EU parliament for which they stood for election, where they add nothing. You last paragraph read likes something out of a fairy tale.
@L53 @GOBSMACKED01 I'd really like to engage but I'm afraid I can't take you seriously.
@Archimedes For serene read 'full of liquid lunch' maybe. Bet you couldn't even afford the vintage or might havre mistaken the bill for a telephone number. Never mind you're paying it along with me.
@L53 @nic mudie You made a literal with touch as did I with havre - so far one all . Why don't you fault my actual comment about five comments upwards? In my usual style - this lot, not only couldn't run a piss up in a brewery , they couldn't be relied upon to pay the duty on the beer.
The whole taxation edifice is wrongly constructed.
By allowing corporations and the very wealthy to avoid taxation - through the use of specialist firms and tax havens - the tax burden inexorably falls upon the middle classes. These middle classes are then subjected to a barrage of misleading propaganda by those connected to those benefiting from such practices, which shifts the blame for their burden upon the "feckless" poor.
Tax sales/turnover at domestic source. Exclude low turnover enterprises (as in Vat). Inflationary? Only at inception, mostly avoidable if changes are brought in gradually.
France's Le Pen tells EU Commission president Juncker to resign over Luxembourg tax evasion
To paraphrase Alex Salmon. "The destination is clear; Juncker will have to go."
We are told he is "serene". Who is doing his comms? The guy who fiddled with Nero whilst Rome was burning?
all happened under Juncker! so when he tells an EU nation off for something they are doing to help boost economic growth in their country, they can throw this in his face!
Plus, dirt on Juncker! I wonder what else we can dig up and throw at him! We can then smuggy sit back, look at all the EU countries that shouted at Britain for apposing his election (I use the word loosely), and say, again, the thing we've said many many times before when it comes to the decisions of the EU, WE TOLD YOU SO BUT YOU NEVER LISTEN TO US!
@DRSH31 @London North I won’t be satisfied till I’m subject to the poor spelling, exclamation marks and childish use of capitals as beautifully demonstrated in your original comment.
This merits the most exhaustive investigation. Prior to the creation of the European Community (later European Union) Luxembourg was an impoverished little statelet largely dependent on declining heavy industry for its livelihood. Now Luxemburgers enjoy one of the highest per capita incomes in Europe. How exactly has that come about?
Interesting that PWC chose to focus on the ‘crime’ of procuring and distributing this information rather than the morality of the tax avoidance. Shows how out of kilter the law is with what’s right and wrong?
I fear that as globalisation increases in intensity so too will this race to the bottom – And as with climate change the only viable solution is some form of global governance. Its frankly depressing reading some of the Rand-esque defence of this situation in the comments.
@London North What do you mean by "the morality of the tax avoidance"? Since when have profit-oriented multinationals ever cared about morality? If not Luxembourg, they would move to the Caribbean, SouthEast Asia, or even Africa to hit their commitments to shareholders.
@Trader Jay @London North This is why I said that governance needs to be global. Have no sympathy for shareholders - That's a vacuous argument. Why should shareholders benefit over the rest of the population?
If as you say these firms have no obligation to be moral, should they continue to be hired for government projects?
How to make a big fuss of something which happens everyday with all tax authorities.
1) A tax ruling is the answer from tax authorities to a request for a specific tax scheme to make sure it complies with the law. Full stop. There is no special deal. Any other company can use the same scheme by asking the same question to the same tax authority.
2) All countries around the world, and in particular in the western world, are passing laws to attract businesses. To take a recent exemple, what about the CICE in France (tax credit to improve competitivity) which will save companies EUR 20 billion in 2014 (after EUR 13 billion in 2013), not petty money and it is state aid. And what about regions or counties providing, for example, free land (or free infrastructure) to attract companies?
Does anybody remember that France, in competition with Spain for the setting up of Eurodisney, granted many advantages to Disney to win, including:
- Below market loan by CDC (state owned financial arm)
- A law to reduce VAT from 18.6% to 7% on leisure parks
- Several commitments for instructure, including bringing the high speed train to Eurodisney
All this fuss is pure hypocrisy. It is indeed easier to slap the face of small countries than introducing structural reforms in several major countries to become competitive or to emphasize that the world most opaque tax center is the Delaware...
@The Whip There is a fuss as the general public did not understand what has been going on & since 2008 when the financial crisis started the public have started to see tax avoidance as a crime of the rich & powerful. Some people / companies have not seen the light yet but tax avoidance is not socially acceptable any more. The public is starting to wake up to this & any company / country not paying attention ought to do so as the risks are huge. Countries that have built an economy based on tax structures such as Ireland, Luxembourg & Switzerland have a lot to fear.
@IcurusCRB @The Whip Bingo. Everyone else from salaried workers, contractors and owners of small / medium businesses have had to pony up the dough to get over this crisis. We're all fairly unhappy that large business can get away with paying less than they should. Even if it's strictly legal (which has yet to be determined fully by the relevant tax authorities / courts assuming it goes further), it's definitely unethical.
The 2008 crisis (shoudn't we say August 207 or even October 1987 when Greepan started to freely pour money) has nothing to do with tax heavens or low taxation countries.
The crisis is the consequence of over-indebtedness and incopmpetence from investors which bought repackedged subprime mortgages.
The crisis is the consequence of over-indebtedness and incopmpetence from investors which bought repackedged subprime mortgages.
This overindebtedness pleased everybody:
- Politicians who could buy votes for the next election via spending largesses, passing the buck to the next generation
- The public which could borrow cheap (well not so cheap cosnumer credit) to buy the morst recent flat TV screen or smartphone and go on holidays on credit
- Corporates who could borrow cheap money with ease to launch a takeover spree, which most of the time was there to flatter CEO's ego (and fill their bank accounts - the difference between a friendly and hostile takeover being the managerial position and/or bank account post merger)
Finally, any country tries to attract as much business as possible, and some are more successful than others; maybe the ones which are complaining should introspect...
The public was given the tax heavens in 2008, which led to the blakc and grey lists of the G20 meeting in London in 2009, as a scapegoat. Much easier than admitting one's own mistakes.
@The Whip @IcurusCRB The crisis may not have been caused by the tax havens but when the middle classes are picking up the bill they start to look around at who isn't sharing the bill fairly. Starbucks quickly realised that not paying tax in the UK was damaging its business & started paying some to repair their reputation.
Agreed;people have the power to change things and should use it: as for Starbuck, pressure companies, since they perfectly understand what markets are about: offer and demand.
People should also pressure their governments to reduce spending public money: less public spending (and a balanced budget) = less debt = less taxes = more purchasing power
Make any costs arising from a Luxembourg subsidiary ineligible as a cost for UK tax calculations.
Little countries and squiredoms with a relatively small tax base will always seek to enrich themselves by becoming tax havens for global corporations so long as they are allowed to. Either that system has to change, or countries have to assume that everyone will dodge corporation tax and find other ways to make business contribute to the infrastructure and human talent that they enjoy.
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