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News : EU Economy Last Updated: Jan 9, 2015 - 8:42 AM


Luxembourg confirmed as massive facilitator of tax avoidance
By Michael Hennigan, Finfacts founder and editor
Nov 6, 2014 - 4:02 AM

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Luxembourg has been confirmed as a massive facilitator of tax avoidance following the leaking of a cache of about 28,000 documents that mainly deal with clients of PricewaterhouseCoopers (PwC) - the Big 4 auditing and tax advisory firm.

The documents deal with tax arrangements for about 1,000 firms including Glanbia and Sisk of Ireland, and Shire, the Dublin headquartered British drugs firm.

The International Consortium of Investigative Journalists (ICIJ) is a Washington-based global network of 185 investigative journalists in more than 65 countries who collaborate on in-depth investigative stories and over the past six months 80 journalists have examined the documents.

The ICIJ says:

  • Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies have secured secret deals from Luxembourg that allowed many of them to slash their global tax bills;
  • PricewaterhouseCoopers has helped multinational companies obtain at least 548 tax rulings in Luxembourg from 2002 to 2010. These legal secret deals feature complex financial structures designed to create drastic tax reductions. The rulings provide written assurance that companies’ tax-saving plans will be viewed favorably by Luxembourg authorities;
  • Companies have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes. Some firms have enjoyed effective tax rates of less than 1% on the profits they’ve shuffled into Luxembourg;
  • Many of the tax deals exploited international tax mismatches that allowed companies to avoid taxes both in Luxembourg and elsewhere through the use of so-called hybrid loans;
  • In many cases Luxembourg subsidiaries handling hundreds of millions of dollars in business maintain little presence and conduct little economic activity in Luxembourg;
  • One popular address – 5, rue Guillaume Kroll – is home to more than 1,600 companies.

Jean-Claude Juncker, prime minister of Luxembourg (1995–2013) and architect of the tax haven, is the new president of the European Commission.

The former Commission opened an investigation into tax perks given by Luxembourg to Amazon and Fiat. Hundreds of other cases are rumoured to be pending.

“I will not get involved in this,” said Juncker, when questioned on the tax deals, after the first weekly meeting of the new EU commissioners on Wednesday.

“I have some idea on that topic but I will keep my counsel.”

The Irish Times reports that Irish food multinational Glanbia has put more than €1bn into companies in Luxembourg that have no employees but serve to reduce its tax bill in Ireland.

The Guardian reports that a Luxembourg unit of Shire, the FTSE-100 "Irish" drug firm behind attention deficit pill Adderall, received more than $1.9bn in interest income from other group companies in the last five years, paying corporation tax of less than $2m over four of the years despite minimal overheads.

The newspaper says: "Among a cluster of Irish-registered Shire firms is a holding company Shire Holdings Ireland No.2 Limited, or SHIL2 for short. This Irish company has for years been charging itself interest on billions of dollars of loans — to itself. More specifically, the interest has been charged on loans from SHIL2’s head office registered near Dublin to a SHIL2 branch office in Luxembourg."

Search the ICIJ database

ICIJ Luxembourg Leaks

Global accounting giants are prime architects of the offshore money maze

Related tax links

Apple says it may have to pay Ireland back tax; Foreign tax rate at 4.4%

Double Irish tax scheme axed; Conventional wisdom wrong again - Part 1

Replacing the Double Irish with Knowledge Development / Patent Box - Part 2

Ireland's small gain from Apple's possible EU tax probe payment

European Commission: Apple given special tax deals by Ireland

Apple's foreign tax rate tumbled after 2007 Irish 'advanced opinion'

G20 finance ministers reaffirm commitment to tax reform; Ibec takes Finfacts' advice

OECD & Tax: Everything grand in Ireland's Republic of Spin?

OECD proposes biggest reform of global business tax rules since 1920s

Finfacts submission to Department of Finance consultation on corporation tax reform

OECD BEPS Project submission from Finfacts: Ireland should embrace corporate tax reform

Irish corporate tax policy like property bubble driven by short-term interests

IMF explains “Double Irish Dutch Sandwich” tax avoidance

US company profits per Irish employee at $970,000; Tax paid in Ireland at $25,000

Estonia heads OECD tax competitiveness index; Ireland at 15, US at 32

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