The scale of tax avoidance by international companies using Luxembourg as a hub for their operations has been highlighted in an investigation into the activities of big business over an eight-year period from 2002 to 2010, released by the International Consortium of Investigative Journalists (ICIJ) according to a report published by CCH say Harris & Co accountants Northampton #accountantsnorthampton
The tax documents released today include nearly 550 individual rulings from 2002 to 2010.
Today’s release marks the first time that these documents have been made public. The leaked information highlights negotiations between the Luxembourg tax authorities and the multinational companies, expedited by leading accounting firms, particularly Big Four giants like PwC.
The publication comes as the Organisation for Economic Cooperation and Development (OECD) ramps up its plans to clamp down on blatant profit shifting, with measures to reduce beneficial transfer pricing and hybid mismatches, as part of its BEPS Action Plan.
The investigation focuses primarily on PwC in this instance, and provides volumes of background documents highlighting the deals with the Luxembourg authorities.
The leaked files provide details of how corporations negotiate deals with Luxembourg officials to obtain favourable tax treatment with details of unguarded comments by PwC auditors about the ‘legality’ of their approach.
In one exchange about Caterpillar, reported by ICIJ, ‘Thomas F Quinn, a PwC partner who helped design the tax-savings plan, wrote a PwC colleague that if they wanted to keep the strategy alive, they needed to “create a story” that “put some distance” between the managers and the spare-parts business’.
‘Get ready to do some dancing,’ Quinn said. The colleague, managing director Steven Williams, replied: ‘What the heck. We’ll all be retired when this ... comes up on audit. Baby boomers have their fun and leave it to the kids to pay for it.’
The ICIJ report comes on the back of various probes by the European Commission into the tax affairs of multinationals, including publication of recent reports into possible abuse of EU state aid as a result of favourable tax agreements between Fiat and Luxembourg tax officials. The Commission probe has also extended to Ireland and the Netherlands.
ICIJ journalists have combed through the documents and found that some corporations can reduce their effective taxes to less than 1% on profits they have shuffled through Luxembourg, according to the ICIJ blog.
ICIJ said that the range of companies seeking tax deals from Luxembourg include Pepsi, IKEA, FedEx, Abbott Laboratories, American International Group (AIG), Amazon, Blackstone, Procter & Gamble, HJ Heinz and JP Morgan Chase.