The country is very small, but the scandal that splashes him, the size of a tsunami. Luxembourg, a founding member country of the European Union and the Eurozone is accused of organizing a massive tax evasion system in favor of 340 multinational corporations, making losing billions of euros to the states.
These are the findings of a survey conducted by the consortium of American investigative journalism (ICIJ) and 40 foreign media and revealed on Thursday. In total, for six months, more than 28,000 documents related to the practice of advance tax agreements, or "tax ruling" that have been peeled.
The practice is legal but considered harmful because it deprives states of tax revenue. Among the listed firms face particular Amazon. But the US online retail giant denies having received a favorable tax treatment.
Pinned as IKEA. The financial architecture of the Swedish multinational is very complex. IKEA has subsidiaries throughout Europe, but his device tax optimization is focused on Luxembourg. The system also passes through the Netherlands, Belgium, Cyprus and Caribbean tax havens, but also Switzerland and Liechtenstein.
The complexity of these systems makes them completely opaque to the tax authorities of the countries in which multinational companies carry the bulk of their sales.
Pepsi is not far behind. According to the report of the consortium of American investigative journalism (ICIJ), the American multinational has spun a web of companies that extends beyond Luxembourg, particularly in Ireland, Bermuda, Gibraltar and Cyprus. The group says, too, respect the laws of the countries in which it thrives.
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To go further, we asked Anne Michel, a journalist for Le Monde. She participated in the survey conducted by the consortium of American investigative journalism (ICIJ).
Olivier Peguy euronews:
In your investigation, you are leaning on the particular case of Ikea. How much do you estimate the savings business through agreements with the Luxembourg system?
Anne Michel, Le Monde:
It is very difficult to estimate the tax gains made by Ikea and all the multinationals which we have investigated, because these tax agreements provide only a partial picture of tax evasion devices that have been in place. However, in a tax agreements that have been analyzed, we find that a device has been developed that will enable distributed nearly 5 billion euros of dividends to shareholders of Ikea which is nothing other than established in Liechtenstein and is also completely tax-exempt foundation. We can estimate the tax gain on this transaction only around 730 million euros.
Olivier Peguy euronews:
What is the mechanism most often used by companies? Can you explain?
Anne Michel, Le Monde:
In fact, the Luxembourg operates as a fiscal tool box and there are various devices very advantageous tax as first holding companies, a status that allows it to be completely tax-free or a whole bunch of financial instruments that, in fact, are taxed anywhere. Ultimately, the goal of all these mechanisms, it is to organize the transfer to Luxembourg income which are organized in other countries by obtaining a lower tax rate, if any.
Olivier Peguy euronews:
What publicly known companies have used this system?
Anne Michel, Le Monde:
In fact are mostly American multinationals such as Apple, Amazon, Pepsi, Heinz, but also European multinationals as we have said, Ikea.
In the case of Ikea which is very interesting, again, is that we can see, we discover that the company has set up a tax avoidance device that not only passes through the Luxembourg but a bundle of tax havens, more or less exotic, including Cyprus and Gibraltar.
Olivier Peguy euronews:
What are the countries that allow and practice these financial arrangements?
Anne Michel, Le Monde:
Luxembourg is not the only one to offer very attractive features for multinationals. In fact three other countries practice this type of device. There including the Netherlands, there is also Ireland and Switzerland. But what we can say is that Luxembourg is, with the Netherlands, the country that is most reluctant to reform its tax breaks, while Ireland and Switzerland have started hiring reforms their most controversial tax schemes.
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