Tax avoidance – Luxembourg tax files

Written on November 9th, 2014 in politics Comments Off

how tiny state rubber-stamped tax avoidance on an industrial scale – Leaked documents show that one of the EU’s smallest states helped multinationals save millions in tax, to the detriment of its neighbours and allies – Published on The Guardian, by Simon Bowers, Nov 5, 2014. (See also: Audio – Irish Times Business Podcast: Lux Leaks, 19.44 min).

An unprecedented international investigation into tax deals struck with Luxembourg has uncovered the multi-billion dollar tax secrets of some of the world’s largest multinational corporations.

A cache of almost 28,000 pages of leaked tax agreements, returns and other sensitive papers relating to over 1,000 businesses paints a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale.  

The documents show that major companies — including drugs group Shire, City trading firm Icap and vacuum cleaner firm Dyson, who are headquartered in the UK or Ireland — have used complex webs of internal loans and interest payments which have slashed the companies’ tax bills. These arrangements, signed off by the Grand Duchy, are perfectly legal … //

… A Guardian analysis has found:

  • A Luxembourg unit of Shire, the FTSE-100 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.
  • Vacuum and hand dryer firm Dyson set up companies in the Isle of Man and Luxembourg to pour £300m of internal loans into its UK operations in 2011. Interest payments made on those loans slashed Dyson’s UK tax bill and were instead taxed at only around 1% in Luxembourg, saving Dyson companies millions in tax.
  • Icap, the financial trading firm run by leading Conservative party donor Michael Spencer, lent $870m from Luxembourg to its US business for seven years. Interest paid out from US companies on those loans was £247m, which was taxed at a fraction of official corporation tax rates in the US and UK.

Stephen Shay, a Harvard Law School professor who has held senior tax roles in the US Treasury and who last year gave expert testimony on Apple’s tax avoidance structures in a Senate investigation, said: “Clearly the database is evidencing a pervasive enabling by Luxembourg of multinationals’ avoidance of taxes [around the world].” He described the Grand Duchy as being “like a magical fairyland” … //

… Many large private equity investments are also the subject of Luxembourg ATAs. Well known buyout firms such as Blackstone and Carlyle appear in the leaked documents, and Luxembourg investment vehicles are commonplace in such investment firms.

A 2008 joint venture between private equity group Apax Partners and Guardian Media Group, which owns the Guardian, also used a Luxembourg structure after it invested in magazine and events group Emap, now called Top Right.

A spokesman for GMG said: “We partnered with a private equity company which regularly used such structures. A Luxembourg entity was used because Apax already had that structure in place. The fact that the parent company is a Luxembourg company does not give rise to any UK corporation tax savings for GMG.”

(full long text).

Find out more or get in touch:

(The full set of documents has been published by the ICIJ. On Thursday November 6, the writer of this report, Simon Bowers, will be answering your questions between 1pm and 2pm GMT. Or you can email the Guardian financial desk at financial@theguardian.com).

Related Links: Luxembourg leaks – Tax Avoidance:

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