A set of leaked documents has shown that hundreds of multinational companies are slashing their tax bills by siphoning hundreds of billions of dollars through Luxembourg.
The papers, reviewed in an investigation of almost 28,000 pages by the International Consortium of International Journalists (ICIJ), relate to well-known names including IKEA, FedEx, Pepsi, Burberry, Amazon, JP Morgan Chase, and nearly 340 more. The majority of the investigated cases were done through global accounting firm PricewaterhouseCoopers and the ICIJ has released 548 Luxembourg tax rulings, or so-called "comfort letters," that date from 2002 to 2010.
One now-retired tax official, Marius Kohl, reportedly signed off on most of the deals. According to the ICIJ, he is referred to as "Monsieur Ruling" and has been described by a newspaper in neighboring Belgium as "the guardian of the only door through which companies can enter the fiscal paradise of Luxembourg."
ICIJ deputy director Marina Walker Guevara told VICE News that she worked for six months on this investigation, along with 80 reporters from all over the world, and the result was proof that "some of the biggest corporations from around the world" are systematically going through Luxembourg to pay their taxes.
One of the most interesting and fascinating things, Guevara explained, is the fact that these transactions are legal and have been "produced on a massive scale over the last ten years."
"This means that if a company wants to significantly lower their global tax bill all they have to do is basically hire an accountant in Luxembourg."
Though the arrangements are legal, Guevara said that this doesn't mean that they're being carried out openly. "In the case of Luxembourg these deals are secretive. They're incredibly aggressive and they basically create a parallel economy where if you are big enough and if you can afford accountants then you can avoid paying taxes."
According to Guevara, the country appears to have deliberately created a system where documents are over-complicated and transactions are multi-layered, effectively allowing the final amount of tax paid to drop below one percent without remark.
Guevara added that their findings don't just apply to large private companies, they also extend to government-controlled corporations.
These allegedly include the Australian government's Future Fund, a Canadian government-run pension fund, and the American International Group (AIG) — a company that was owned by the US government when they obtained their tax ruling,
Ian Roxan, director of the tax program at the London School of Economics, told VICE News: "This is in the realm of tax avoidance rather than tax evasion. Aggressive tax avoidance is about making adventurous interpretations of the rules, and stretching the line as far as you can.
"They're operating in an area where the rules are not very precisely defined and I think the accusation is that they are being more generous than the normal international interpretation would be."
Luxembourg is one of the smallest nations in Europe. It is the world's only remaining grand duchy and has a population of less than 550,000.
Luxembourg's ex-prime minister, Jean-Claude Juncker, began his term as president of the European Commission five days ago. Before resigning from his position last year, Juncker was prime minister of his country since 1995 and was also finance minister between 1989 and 2009. Luxembourg — along with Ireland and Malta — is being investigated by European Commission as part of their crackdown on tax avoidance schemes, and pressure is now mounting on Juncker to disclose how much he knew.
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