Walt Disney Co. and Microsoft Corp.'s Skype unit are among hundreds of companies that benefited from lower taxes through “secret” deals with Luxembourg, according to a new report by a group of investigative journalists.
Confidential documents released by the group show that Hong Kong-based Hutchison Whampoa Ltd. and private equity firm Warburg Pincus LLC also are among the international companies that have benefited from arrangements in the country allowing them to cut their tax bills. The International Consortium of Investigative Journalists posted the documents on its website late Tuesday.
More than 340 companies have transferred profits to Luxembourg using complicated tax arrangements, the group of more than 80 journalists said in a report on Nov. 5, which reviewed almost 28,000 documents and identified companies such as PepsiCo Inc., Ikea Group and FedEx Corp. Some corporations effectively lowered their tax bill to less than 1 percent of profit, the group said.
The latest disclosures give details of the tax deals for 35 companies that were arranged by accounting firms PricewaterhouseCoopers LLP, Deloitte LLP, KPMG and Ernst & Young. The four firms declined to answer questions regarding the tax agreements and cited their global codes of conduct requiring their employees to comply with the law and behave ethically, the ICIJ said.
“Luxembourg agrees that the legitimacy of certain mechanisms, which are compliant with international and national law, can be put in doubt from an ethical point of view,” Luxembourg's Finance Ministry said today. Non-double-taxation agreements and the interaction of different countries' tax systems “can lead to a significant reduction of a company's tax burden, or even no taxation at all,” it said.
This needs to be seen from a “broad perspective, and cannot be limited to one country's regulatory framework,” the ministry said in a statement.
Without commenting on individual cases, the ministry rejected claims that tax rulings by the country are secret. “They are unilateral decisions by the tax authority. They are not, and never have been, secret,” it said.
EU Probe
Luxembourg, with a population of about 500,000, is among countries being investigated by the European Commission for tax deals that may have violated the 28-nation bloc's state-aid rules. Firms in the EU probe named so far include Amazon.com Inc. and Fiat Finance & Trade in Luxembourg, Starbucks Corp. in the Netherlands and Apple Inc. in Ireland.
Bombardier Inc. is among the companies that had documents on Luxembourg tax rulings revealed yesterday by Belgian newspaper Le Soir, which worked with the ICIJ.
“Bombardier's global corporate structure is in line with the relevant laws, including fiscal laws,” said Isabelle Rondeau, a spokeswoman for the Montreal-based company.
“Disney and Koch Industries, a U.S.-based energy and chemical conglomerate, both created tangles of interlocking corporations in Luxembourg that may have helped them slash the taxes they pay in the U.S. and Europe, according to the documents,” the ICIJ said on its website.
Zenia Mucha, a Disney spokeswoman in the U.S., called the report “deliberately misleading,” saying Disney's global tax rate has averaged 34 percent over the last 5 years. “The ruling has not meaningfully affected the taxes we pay in any jurisdiction globally,” Mucha said in an e-mailed statement.
Rob Tappan, director of External Relations for Koch Companies Public Sector, said “all Koch companies” pay “taxes in accordance with applicable laws,” according to ICIJ. The company declined to respond to detailed questions about its Luxembourg operations, the group said.
“One of the Skype files relates to a restructuring in which Internet mega-marketer eBay sold a controlling stake in Skype to private investors,” the ICIJ said. The group cited a Microsoft e-mail in which the company said it “adheres carefully to the laws and regulations of every country in which we operate.”
Jean-Claude Juncker, who was Luxembourg's prime minister for almost 19 years until late 2013, said last month that he had no involvement in the deals during his time as finance minister or premier of the nation. Juncker took over as president of the European Commission in Brussels on Nov. 1.
Bloomberg News
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