Tax Avoidance on an Industrial Scale

Wordsmith

LE
Book Reviewer
The Guardian is carrying an article showing how - in their own words - Luxembourg helps multinationals to avoid tax on an industrial scale.

http://www.theguardian.com/business...ourg-tax-files-tax-avoidance-industrial-scale
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.

The documents also show how some 340 companies from around the world arranged specially-designed corporate structures with the Luxembourg authorities. The businesses include corporations such as Pepsi, Ikea, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan and FedEx. Leaked papers relating to the Coach handbag firm, drugs group Abbott Laboratories, Amazon, Deutsche Bank and Australian financial group Macquarie are also included.

All this is legal, but obviously all tax avoidance doesn't help the finances of the states they trade in including the UK. The full documents are here.

http://www.icij.org/project/luxembourg-leaks/explore-documents-luxembourg-leaks-database

Wordsmith
 

Themanwho

LE
Book Reviewer
Well the Guardian would know, considering their own somewhat shady tax avoidance credentials.
 
Nothing wrong with paying the least tax you can legally get away with.
We all do it. Or do some of you send a bit extra to the tax man each year?

If the tax rules allow for it then someone is going to do it. It is up to the people who write the rules to make sure they are at least a clever as all those who don't want to give their money to the government.
 

Themanwho

LE
Book Reviewer
Nothing "wrong" with it, but considering that the Guardian is a cheerleader for all things pinko and tax enpansionist ("Stop the cuts" etc), it does rather smack of hypocrisy.
 

philc

LE
Dont worry the new President of the European Commission will sort it out, Jean-Claude Juncker hes well familiar with how Luxembourg works.

And this is how it works, countries run schemes to attract global companies to their shores hoping to collect the crumbs off the table after the companies have moved, manipulated and parked funds and loans to minimize tax exposure. Nothing new and entirely legal.

Pop stars, comedians, and the likes Ken Livingstone and Russel Brand use methods to minimize their tax exposure, nothing new and legal. The average Joe in the street does not have the luxury of these schemes so he picks up the bill for the running of the country via his tax.

Want to stop it, scrap the schemes, make every multi national that trades in the country pay tax in the country it trades in and don't allow the likes of Amazon to post goods purchased via a foreign web site in to the country with out an import duty or tax.

Of course it wont happen, ever.
 

philc

LE
There are some moves afoot to get tax loopholes closed by the EU. Yes them.

Not 100% sure on the details but apparently hiding your cash in the Caymans, Luxembourg and the like is no longer going to be possible.

Seems it is more aimed at those who are tax evaders ie illegally hiding the cash.

http://www.swissinfo.ch/eng/bank-da...ands-global-push-against-tax-dodgers/41086312

The Italian Guardia di Finanza is very hot on this, mostly due to the massive amount of tax avoidance that goes on in the country, I am sure most countries are following. Add in the mix of anti terrorism laws and that form of avoidance is becoming more difficult.

However the big schemes will continue for multi nationals.
 
Apparently German journos from WDR, NDR amongst others "obtained" the docs and published the results. Juncker who is no longer President of Luxembourg has more or less washed his hands on this matter even though he was allegedly responsible. In his new role has cannot interfere in Luxembourgs internal affairs. Convenient.
 

Wordsmith

LE
Book Reviewer
If the tax rules allow for it then someone is going to do it. It is up to the people who write the rules to make sure they are at least a clever as all those who don't want to give their money to the government.

Indeed. from the article.
One of Shire’s Luxembourg units has made $1.87bn in profits in the last five years, largely from making loans to sister companies, as it charged interest rates of up to 9% on those loans. With what appears to be the consent of the Luxembourg authorities, the enormous profits generated by this unit were taxed at a fraction of 1%.

So one Shire company lends to other Shire companies at 9%. The interest the other Shire companies pay on the loans reduced their profits and and hence taxes. The Shire company making the loans pays 1% tax on the profits made at lending money at 9% interest (way over the commercial rate) in Luxembourg.

Legal tax avoidance but frankly taking the piss.

Wordsmith
 
Dont worry the new President of the European Commission will sort it out, Jean-Claude Juncker hes well familiar with how Luxembourg works.

And this is how it works, countries run schemes to attract global companies to their shores hoping to collect the crumbs off the table after the companies have moved, manipulated and parked funds and loans to minimize tax exposure. Nothing new and entirely legal.

Pop stars, comedians, and the likes Ken Livingstone and Russel Brand use methods to minimize their tax exposure, nothing new and legal. The average Joe in the street does not have the luxury of these schemes so he picks up the bill for the running of the country via his tax.

Want to stop it, scrap the schemes, make every multi national that trades in the country pay tax in the country it trades in and don't allow the likes of Amazon to post goods purchased via a foreign web site in to the country with out an import duty or tax.

Of course it wont happen, ever.

To be fair the average joe wouldn't benifit as the cost of empolying the accountant would be lost against the tax saving. Only works for hypocrits like Russel champayne commie Brand.
 

Gout Man

LE
Book Reviewer
And yet us mere mortals have to pay 40% inheritance tax on anything above the piddling threshold amount of £325,000.
About time they scrapped this or at least increased the threshold to £1000,000, bearing in mind the value of houses.
 

philc

LE
To be fair the average joe wouldn't benifit as the cost of empolying the accountant would be lost against the tax saving. Only works for hypocrits like Russel champayne commie Brand.

Eliminate the schemes used by Take That and co, and all the others and they either go aboard or pay more tax, either way its a win win solution.

Then we have the other issue with tax, the monumental waste across all areas of government spending. Reign in that and tax for all would be lower.

Ultimately its our money being spent, not the governments to throw around.
 

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