14 DAY TRIAL // Everyone is looking to avoid paying taxes, especially if they’re multi-billion corporations. Their location of choice this time around? Luxembourg.
According to an investigation led by some 40 media organizations in the world, amounting to some 80 journalists in 26 countries, some 340 multinational companies have signed secret financial accords with Luxembourg in order to minimize their taxes.
The report is based on documents obtained by the International Consortium of Investigative Journalists and has taken some six months to put together since the entire cache of leaked tax agreements has almost 28,000 pages.
The list includes companies from many domains. From the tech industry there’s Accenture, Amazon, Apple, Verizon, Vodafone, while from the energy industry, there’s Gazprom, HSBC, Prospector Offshore Drilling and more.
The list of companies from the financial world is the lengthiest and includes ABN Amro, AEA Investors, AIG, Aviva, AXA, BNP Paribas, Citigroup, Credit Suisse, GE Group, Intesa Sanpaolo, Lehman Brothers, Merrill Lynch, and Unicredit Group.
From the list of companies from the food industry there’s Heinz, LVMH Moet Hennessy Louis Vuitton, and Pepsi, while the list of companies from the health industry includes GlaxoSmithKline, Shire, TEVA Pharmaceutical and more.
The media industry is just as greedy and includes the Guardian Media Group, while the retail companies list includes Burberry, Coach, Dyson, FedEx, Ikea, Kohler, Office Depot, Procter & gamble, and Timberland. The full list is, of course, a lot longer than this.
How did they do it?
All these companies signed agreements with the Luxembourg officials between 2002 and 2010 and they translate into billions of euros of lost taxes for the states where these companies operate in.
Given the rather loose financial laws in Luxembourg, all these companies were more than happy to save some money by derailing the flow through the country. Their profits ended up either not being taxed at all or very little.
Tax rulings are perfectly legal and they allow companies to know ahead of time how they are going to be treated by the fiscal administration of a certain country to obtain various legal guarantees.
The companies managed to do this by simply creating a new branch, a holding or by moving the registered office to Luxembourg. Newspapers that have handled the documents state that Luxembourg keeps these fiscal agreements a secret and they don’t notify their European partners, although they know exactly what the multinationals are doing and how they’re using the state’s laws to dodge taxing.
The Guardian, for instance, estimates that the newly revealed information will be quite embarrassing for the European Commission President, Jean-Claude Juncker, who was the prime minister of Luxembourg between 1995 and 2013, covering the entire period the documents refer to.
The documents that are affecting the image of so many companies were redacted by PricewaterhouseCoopers (PwC), audit and financial consulting company.
While this type of practices aren’t illegal, there has been a lot of talk about how they shouldn’t be allowed since these companies are evading paying taxes to a lot of countries, which minimizes the amount of money going into state budgets across Europe.
Tech companies such as Google, Facebook, Apple and Amazon have been heavily criticized for entering similar deals by rerouting all their cash flow through Ireland.