7 ms·

Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg

55 points by flexie 12y ago

flexie 12y ago
This is the original article from the International Consortium of Investigative Journalism, which uncovered the secret tax deals.
JetSpiegel 12y ago
This is common knowledge for ages, good to see it properly proven. However, it seems there's something else at play here when you realize Juncker has just started his term as European Comission president, and the TTIP deals going on. It seems fishy that this only appears now and with such fanfare.
- nomailing 12y ago
  You are mixing up two persons: Jean-Claude Juncker is starting his term as the European Comission president. Jean-Claude Trichet was president of the ECB.
  - JetSpiegel 12y ago
    Yes of course, that's what I meant. I edited the original post.
- vixen99 12y ago
  Common knowledge that Jean-Claude Juncker has just begun his term as European Commission President.
- return0 12y ago
  Well, now is the best time then. It's good to see on what ground the modern european leaders are built. Dont forget that germany officially punished Cyprus for doing similar things. And lets not forget he is not an elected President
  - gutnor 12y ago
    European Union is a union in a UN sense rather than USA sense. There is no European value or identity to defend, so neither Cyprus nor Luxembourg is doing anything wrong really, just playing their card and do the best for their citizen first and foremost. Cyprus found itself in a hole with no good geopolitical bargaining chips so they got screwed. All the argumentation that followed was to make the pill easier to swallow for other EU citizen. Like "Look we are screwing them up and it is scary but they are bad guys, so don't worry, that won't happen here." Nobody is unhappy with Luxembourg right now, so nothing will happen. At best politician in other countries will moan and complain about the various companies involved and maybe build up public outrage to justify extra local taxation.
    - return0 12y ago
      >European Union is a union in a UN sense rather than USA sense Are you from the EU? You do know that EU law supersedes national law, right? Or that a number of southern european countries don't have control of their finances for 5+years now? It's not an inconsequential union. Also, if they are not doing nothing wrong, then i don't know if the word "wrong" has any uses anymore.
      - mike_hearn 12y ago
        EU law functions via directives, which are implemented by governments into local law. It's a little different to the US federal system. Those southern European countries do have direct control of their own finances. They could declare bankruptcy and start over if they wanted to. When people say they are 'controlled' by Germany or whatever, those people are in a lazy and misleading way saying that those countries preferred to get loans from other countries and submit to those lenders requirements rather than immediately make their spending match their tax revenues ... because borrowing is easier, politically. But that's still a free choice they made. WRT wrongness, you seem to believe that any country which charges a lower tax rate than any other country is somehow immoral? You want a global government that sets a single tax rate for every person and company on earth? That's one way to avoid people playing jurisdictional arbitrage, but I don't see anyone arguing for that.
simonebrunozzi 12y ago
Help! On another, similar article, they have used one of my pictures, with me and my wife in it - http://www.euractiv.com/sections/competition/luxembourg-tax-deals-weigh-juncker-309805 http://www.euractiv.com/sections/competition/luxembourg-tax-... The only reason I think is because it was taken in front of the Amazon office in Luxembourg. Any suggestion on how to ask for removal, and possibly compensation for damage?
- oskarth 12y ago
  Tweet them: https://twitter.com/euractiv https://twitter.com/euractiv and https://twitter.com/DominiqueOstyn https://twitter.com/DominiqueOstyn EDIT: Interesting that people are downvoting a simple "talk to them, here's how" comment. Before going all litigious and looking up the specifics of fair use for various licenses, what exactly is wrong with asking them nicely?
  - vidarh 12y ago
    > Before going all litigious and looking up the specifics of fair use for various licenses, what exactly is wrong with asking them nicely? I agree. Most likely they've just done a quick search and don't particularly care what photo they used.
- jgrahamc 12y ago
  The image you are talking about appears to be: http://www.flickr.com/photos/25012939@N03/4196459317 http://www.flickr.com/photos/25012939@N03/4196459317 on that image it says: "Some rights reserved" and when you click through you are taken to https://creativecommons.org/licenses/by-sa/2.0/ https://creativecommons.org/licenses/by-sa/2.0/ So, it appears you have the photograph available on the Attribution-ShareAlike 2.0 Generic Creative Commons license. The original story using your picture is attributing it to you. So it appears to me that they've done nothing wrong. If you want to ask them not to use it then there's a contact page: http://www.euractiv.com/contact http://www.euractiv.com/contact
  - brazzy 12y ago
Cthulhu_ 12y ago
I for one hope the countries in question will patch the tax holes, but not as much as to make the companies evade to other countries. The national economies would be vastly improved, at the expense of shareholder dividend.
- mike_hearn 12y ago
  Well, this problem is fundamental to trying to tax entities that don't have any specific location. Taxing people is quite simple because you can't split a person up - just count the days they reside in a particular tax jurisdiction and once it goes over a certain number of days per year, you say "you are resident here, benefiting from our services, so pay us tax" and as long as that number of days per year is reasonable, it all sort of works. And it feels fair(ish) because people can vote, so they get to control what their tax money is spent on, modulo lots of handwaving about how we all use insufficiently good voting systems. A company though, can be split up and spread around, and many modern companies operate almost everywhere and yet nowhere in particular. That's very true of internet companies that don't need any local presence to operate in a country. Additionally they are seen as ideal tax targets by politicians because they can't vote, and are often perceived as "foreign" even if the reality is rather more complex, and people perceive tax on corporations to be free as the price increases that it (theoretically) results in can't be distinguished from general price rises due to inflation. So we end up in a messy situation that suits nobody. Big companies exploit their trans-national nature to try and get taxed in places that don't really need the money like Luxembourg. Big countries try and exploit their size to extract as much money as possible from the evil foreign capitalists, regardless of where they may actually be based. Companies get taxed without representation and we just sort of ignore this because we feel they can already buy too much influence with politicians anyway, even without them actually getting to vote on anything. And in the end, governments still don't have enough money. Economists who study this problem sometimes conclude that the best rate to set corporation tax at is zero; they argue that "dead weight costs" of corporation taxes are very high compared to most taxes and besides, ultimately the costs get passed on to consumers. Of course this ignores the fact that business is global but taxation and voting is still very local. What might make theoretical sense in a textbook rarely seems sensible to the man on the street.
prawn 12y ago
Anyone got any ideas on how governments could effectively clamp down on this? In Australia, IKEA paid 1%* tax over the last 12 years, even as sales surged 500%: http://www.theguardian.com/world/2014/nov/06/luxembourg-tax-leaks-put-pressure-on-g20-leaders-to-act-on-loopholes http://www.theguardian.com/world/2014/nov/06/luxembourg-tax-... (The Guardian article has since removed the 1% reference, though it was in there when I first read the article.)
- return0 12y ago
  First you need to communicate this to the public and show that the problem is only going to get worse, as globalization allows more and more elaborate schemes like this. This will justify lowering corporate taxes, or establishing official authorities that will negotiate special tax deals with companies. In short, what luxembourg is doing, all big countries will be doing soon as well.
- lumberjack 12y ago
  I would understand how small countries would have a hard time dealing with big corps but could not a big country just tell them to close shop and go elsewhere if it deems them to be evading taxes? Probably some kind of FTA forbids his but in principle it should work, shouldn't it? After all countries are supposed to be sovereign entities.
  - xgbi 12y ago
    Problem is, in regard of European laws, you can't tell them to fuck off if they are not doing anything unlawful. And here it is the case, they exploit a hole in the law which allows to create subsidiaries in Luxembourg through which the French/German/whatever company is paying the products it sells.
    - mike_hearn 12y ago
      The hole in the law is not really a hole, it's designed to work like that. The EU single market was created to simplify trade across borders in Europe, because that makes everyone wealthier. Imagine if every country had to make everything itself! Tax is a big part of what makes trade complicated. If you had to file taxes in dozens of different languages, dozens of times, each year to every EU country, it'd be much harder to sell across the single market. So the EU does not require that, you can incorporate once and sell to the whole market. That means, you get to pick where in the EU you incorporate, and as different regions have different levels of taxation .... well, it's no different to freedom of movement for individuals. They can go live somewhere with lower taxes if they want to. The places they didn't choose to live might not like that, but you can't have both simplicity and every government getting to tax everyone else.
return0 12y ago
Love this. Would love to see similar stuff from Switzerland, Singapore, Channel islands, UAE etc.
firstaccount 12y ago
link to the docs? Probably an interesting read.
- firstaccount 12y ago
  https://s3.amazonaws.com/iw-files/apps/2014/12/luxleaks/search.html?country=&q=&x=10&y=9 https://s3.amazonaws.com/iw-files/apps/2014/12/luxleaks/sear...
justcommenting 12y ago
To the extent these types of activities are legal, I still hope we'll see the media and customers increasingly--and visibly--questioning corporate/managerial patriotism in situations like this.
smoyer 12y ago
Does anyone else read these articles and feel a tinge of jealousy? I'm hoping that someday one of my businesses will generate the kind of money that would make tax-hiding worthwhile. As an aside, it's kind of nice to see the government's over-complicated tax code used against them.
jayvanguard 12y ago
I can totally see some CFO getting fired over this. For being NOT on the list.

55 points by flexie 12y ago

This is the original article from the International Consortium of Investigative Journalism, which uncovered the secret tax deals.

JetSpiegel 12y ago

This is common knowledge for ages, good to see it properly proven. However, it seems there's something else at play here when you realize Juncker has just started his term as European Comission president, and the TTIP deals going on. It seems fishy that this only appears now and with such fanfare.

nomailing 12y ago
You are mixing up two persons: Jean-Claude Juncker is starting his term as the European Comission president. Jean-Claude Trichet was president of the ECB.
- JetSpiegel 12y ago
  Yes of course, that's what I meant. I edited the original post.
vixen99 12y ago
Common knowledge that Jean-Claude Juncker has just begun his term as European Commission President.
return0 12y ago
Well, now is the best time then. It's good to see on what ground the modern european leaders are built. Dont forget that germany officially punished Cyprus for doing similar things. And lets not forget he is not an elected President
- gutnor 12y ago
  European Union is a union in a UN sense rather than USA sense. There is no European value or identity to defend, so neither Cyprus nor Luxembourg is doing anything wrong really, just playing their card and do the best for their citizen first and foremost. Cyprus found itself in a hole with no good geopolitical bargaining chips so they got screwed. All the argumentation that followed was to make the pill easier to swallow for other EU citizen. Like "Look we are screwing them up and it is scary but they are bad guys, so don't worry, that won't happen here." Nobody is unhappy with Luxembourg right now, so nothing will happen. At best politician in other countries will moan and complain about the various companies involved and maybe build up public outrage to justify extra local taxation.
  - return0 12y ago
    >European Union is a union in a UN sense rather than USA sense Are you from the EU? You do know that EU law supersedes national law, right? Or that a number of southern european countries don't have control of their finances for 5+years now? It's not an inconsequential union. Also, if they are not doing nothing wrong, then i don't know if the word "wrong" has any uses anymore.
    - mike_hearn 12y ago
      EU law functions via directives, which are implemented by governments into local law. It's a little different to the US federal system. Those southern European countries do have direct control of their own finances. They could declare bankruptcy and start over if they wanted to. When people say they are 'controlled' by Germany or whatever, those people are in a lazy and misleading way saying that those countries preferred to get loans from other countries and submit to those lenders requirements rather than immediately make their spending match their tax revenues ... because borrowing is easier, politically. But that's still a free choice they made. WRT wrongness, you seem to believe that any country which charges a lower tax rate than any other country is somehow immoral? You want a global government that sets a single tax rate for every person and company on earth? That's one way to avoid people playing jurisdictional arbitrage, but I don't see anyone arguing for that.

simonebrunozzi 12y ago

Help! On another, similar article, they have used one of my pictures, with me and my wife in it - http://www.euractiv.com/sections/competition/luxembourg-tax-deals-weigh-juncker-309805 http://www.euractiv.com/sections/competition/luxembourg-tax-... The only reason I think is because it was taken in front of the Amazon office in Luxembourg. Any suggestion on how to ask for removal, and possibly compensation for damage?

oskarth 12y ago
Tweet them: https://twitter.com/euractiv https://twitter.com/euractiv and https://twitter.com/DominiqueOstyn https://twitter.com/DominiqueOstyn EDIT: Interesting that people are downvoting a simple "talk to them, here's how" comment. Before going all litigious and looking up the specifics of fair use for various licenses, what exactly is wrong with asking them nicely?
- vidarh 12y ago
  > Before going all litigious and looking up the specifics of fair use for various licenses, what exactly is wrong with asking them nicely? I agree. Most likely they've just done a quick search and don't particularly care what photo they used.
jgrahamc 12y ago
The image you are talking about appears to be: http://www.flickr.com/photos/25012939@N03/4196459317 http://www.flickr.com/photos/25012939@N03/4196459317 on that image it says: "Some rights reserved" and when you click through you are taken to https://creativecommons.org/licenses/by-sa/2.0/ https://creativecommons.org/licenses/by-sa/2.0/ So, it appears you have the photograph available on the Attribution-ShareAlike 2.0 Generic Creative Commons license. The original story using your picture is attributing it to you. So it appears to me that they've done nothing wrong. If you want to ask them not to use it then there's a contact page: http://www.euractiv.com/contact http://www.euractiv.com/contact
- brazzy 12y ago

Cthulhu_ 12y ago

I for one hope the countries in question will patch the tax holes, but not as much as to make the companies evade to other countries. The national economies would be vastly improved, at the expense of shareholder dividend.

mike_hearn 12y ago
Well, this problem is fundamental to trying to tax entities that don't have any specific location. Taxing people is quite simple because you can't split a person up - just count the days they reside in a particular tax jurisdiction and once it goes over a certain number of days per year, you say "you are resident here, benefiting from our services, so pay us tax" and as long as that number of days per year is reasonable, it all sort of works. And it feels fair(ish) because people can vote, so they get to control what their tax money is spent on, modulo lots of handwaving about how we all use insufficiently good voting systems. A company though, can be split up and spread around, and many modern companies operate almost everywhere and yet nowhere in particular. That's very true of internet companies that don't need any local presence to operate in a country. Additionally they are seen as ideal tax targets by politicians because they can't vote, and are often perceived as "foreign" even if the reality is rather more complex, and people perceive tax on corporations to be free as the price increases that it (theoretically) results in can't be distinguished from general price rises due to inflation. So we end up in a messy situation that suits nobody. Big companies exploit their trans-national nature to try and get taxed in places that don't really need the money like Luxembourg. Big countries try and exploit their size to extract as much money as possible from the evil foreign capitalists, regardless of where they may actually be based. Companies get taxed without representation and we just sort of ignore this because we feel they can already buy too much influence with politicians anyway, even without them actually getting to vote on anything. And in the end, governments still don't have enough money. Economists who study this problem sometimes conclude that the best rate to set corporation tax at is zero; they argue that "dead weight costs" of corporation taxes are very high compared to most taxes and besides, ultimately the costs get passed on to consumers. Of course this ignores the fact that business is global but taxation and voting is still very local. What might make theoretical sense in a textbook rarely seems sensible to the man on the street.

prawn 12y ago

Anyone got any ideas on how governments could effectively clamp down on this? In Australia, IKEA paid 1%* tax over the last 12 years, even as sales surged 500%: http://www.theguardian.com/world/2014/nov/06/luxembourg-tax-leaks-put-pressure-on-g20-leaders-to-act-on-loopholes http://www.theguardian.com/world/2014/nov/06/luxembourg-tax-... (The Guardian article has since removed the 1% reference, though it was in there when I first read the article.)

return0 12y ago
First you need to communicate this to the public and show that the problem is only going to get worse, as globalization allows more and more elaborate schemes like this. This will justify lowering corporate taxes, or establishing official authorities that will negotiate special tax deals with companies. In short, what luxembourg is doing, all big countries will be doing soon as well.
lumberjack 12y ago
I would understand how small countries would have a hard time dealing with big corps but could not a big country just tell them to close shop and go elsewhere if it deems them to be evading taxes? Probably some kind of FTA forbids his but in principle it should work, shouldn't it? After all countries are supposed to be sovereign entities.
- xgbi 12y ago
  Problem is, in regard of European laws, you can't tell them to fuck off if they are not doing anything unlawful. And here it is the case, they exploit a hole in the law which allows to create subsidiaries in Luxembourg through which the French/German/whatever company is paying the products it sells.
  - mike_hearn 12y ago
    The hole in the law is not really a hole, it's designed to work like that. The EU single market was created to simplify trade across borders in Europe, because that makes everyone wealthier. Imagine if every country had to make everything itself! Tax is a big part of what makes trade complicated. If you had to file taxes in dozens of different languages, dozens of times, each year to every EU country, it'd be much harder to sell across the single market. So the EU does not require that, you can incorporate once and sell to the whole market. That means, you get to pick where in the EU you incorporate, and as different regions have different levels of taxation .... well, it's no different to freedom of movement for individuals. They can go live somewhere with lower taxes if they want to. The places they didn't choose to live might not like that, but you can't have both simplicity and every government getting to tax everyone else.

return0 12y ago

Love this. Would love to see similar stuff from Switzerland, Singapore, Channel islands, UAE etc.

firstaccount 12y ago

link to the docs? Probably an interesting read.

firstaccount 12y ago
https://s3.amazonaws.com/iw-files/apps/2014/12/luxleaks/search.html?country=&q=&x=10&y=9 https://s3.amazonaws.com/iw-files/apps/2014/12/luxleaks/sear...

justcommenting 12y ago

To the extent these types of activities are legal, I still hope we'll see the media and customers increasingly--and visibly--questioning corporate/managerial patriotism in situations like this.

smoyer 12y ago

Does anyone else read these articles and feel a tinge of jealousy? I'm hoping that someday one of my businesses will generate the kind of money that would make tax-hiding worthwhile. As an aside, it's kind of nice to see the government's over-complicated tax code used against them.

jayvanguard 12y ago

I can totally see some CFO getting fired over this. For being NOT on the list.