Luxembourg: Engine-room of the tax-break economy

Four high-profile audit firms have been named-and-shamed as architects of a tax minimisation structure used by hundreds of the world's big-name companies, including a slew in the tech sector. The International Consortium of Investigative Journalists has published details of how the structure worked, along with identifying many …

[P. Lee]

There is an easy way to fix this without draconian measures

Force companies to include number of units sold in (in whatever jurisdiction) and divide the total (pre-tax) profit declared to shareholders.

A far better solution than a ham-fisted attempt to interfere in the tax affairs of sovereign nations.

What, corporations screaming that isn't fair? Awww. It would be kind of like their own special IR35.

[Suricou Raven]

Legality?

How much of this is actually illegal? The standard corporate approach to tax is to be 'tax efficient' - structuring the company to pay a little tax as possible, but without actually crossing the line into tax evasion or fraud.

[Tim Worstal]

Re: Legality?

All of it is entirely legal.

Whether it should be legal is another matter of course.

[Anonymous Coward]

Re: Legality?

"All of it is entirely legal."

I'd dispute that it is legal - transfer pricing to move profits around is illegal in most jurisdictions. Just because the crooked megacorps like Starbucks often use "license agreements" in this way doesn't mean it's legal. The problem is that national authorities don't work hard enough to find the details, prove that this is what is going on, and prosecute. Partly this is lack of will because too many politicians are on the lobbying payroll, but in large part it is a resource, skills and talent problem in HMRC, who don't have the time, the experience, or the intellectual firepower to take on some of the world's best (paid) tax lawyers. In exactly the same way that a premiership footballer stands a much better chance than an ordinary Joe Soap of being acquitted for rape, driving offences or what have you, because his lawyer is an experienced, talented expert paid far more than the Clown Prosecution Service drones.

The best way to fix this would be to partly outsource complex tax investigations to legal experts on a contingent fee basis. The big law firms wouldn't touch this work because they are on the side of the bad guys, but there's plenty of small expert law firms who take up the cudgels and have more than enough expertise. In much the way that RBS got thoroughly nailed by "small" law firms over Highland Capital (wink, wink, nudge, nudge, to those in the know).

[Richard Barnes]

Re: Legality?

You're right. In tax issues what is legal is a matter of opinion and the corporations can afford to spend a great deal of money on tax lawyers explaining how their opinion is the right opinion.

IMHO, the root cause of the problem is the complexity of the tax laws. Tolley's Tax Guide on UK law alone now runs to 11,500 pages - a doubling in length in the last 17 years. If only legislatures could get together and agree on a massive simplification of tax laws then it would make it harder for wealthy entities to avoid.

Of course, legislatures are full of lawyers, so why would they want to reduce their earning opportunities?

[tojb]

Time for reform

With increased globalisation it is becoming more important to make sure that companies serve the economies of the countries that they operate in.

[Anonymous Coward]

Re: Time for reform

"With increased globalisation it is becoming more important to make sure that companies serve the economies of the countries that they operate in."

You miss the point. By virtue of (say) Amazon operating in the UK, they are serving the economy - I get cheap goods, reasonable service, and average delivery. The people who aren't being served are the government, who want a bigger share than they already have of private sector profits, to fritter on what they loosely term "public services". You know, things like HS2, foreign aid, failed technology schemes, shredders for parliamentary expenses evidence.

To an extent the tax debate is simply about allocating money between one secretive and undemocratic group (government) or another (large global corporations).

[DavCrav]

Re: Time for reform

"You know, things like HS2, foreign aid, failed technology schemes, shredders for parliamentary expenses evidence."

And schools, hospitals, roads, pensions, etc. Which is 98.6% of government spending, whereas foreign aid to such undeserving countries as Ethiopia, Malawi, Congo, and other titans of industry, is 1.4% of government spending. If HS2 costs £50bn over ten years, that's 0.7% of government spending for each of those years. These numbers aren't much, because almost all government spending is on education, pensions and the NHS. If a company dodges £500m of tax, it's those budgets that it has to come out of, because that's almost all government spending.

[Stretch]

Why the fuck do we put up with this shit? All these corrupt little states... Luxembourg, Switzerland, Monaco. They don't have armies or any real population, or any use beyond tax havens for the rich. Well the useless protesters last night had no idea what to protest about, how 'bout this shit?

[Anonymous Coward]

Unfortunately if you're going to condemn shitty, corrupt little states that facilitate questionable tax avoidance for the rich and for big corporations then you'd better include Ireland, the Isle of Man, the Channel Islands, possibly the Netherlands, and most of all the Shitty of London.

And although these places may have no military, neither do we these days.

Note for non-British readers: London is about as British as Monaco is French. And as with Monaco, nobody knows how it is governed, and it is full of arrogant rich foreign bastards (plus quite a few arrogant rich native bastards).

[Destroy All Monsters]

Never forget that "tax non-transparency" helped to get Jews out of Europe last time

Frankly, this shit is ridiculous.

Sounds more like journalists wanting to get into the news because "beellions NOT TAXED" (which is bad how?), while central banks pump out tens of billions per month to well-connected persons and revolving door outfits.

Anyone who can read french: L’étalage non assumé des rulings. These are legit companies doing legit deals. Yes, they are dodging taxes abroad, but so what?

[DavCrav]

Re: Never forget that "tax non-transparency" helped to get Jews out of Europe last time

"Yes, they are dodging taxes abroad, but so what?"

So we, that is you and I, have to make up the shortfall. The reason that tax rates are high on personal income, and VAT is 20%, is because other people, like celebrities and companies, are avoiding/evading tax. We could have lower taxes for the poor, or greater spending on them, if the rich weren't such complete selfish bastards, wanting their eighth or ninth million tax free, rather than paying what they fucking should.

[arrbee]

As pointed out in Private Eye last week, the architect of the great Luxembourg tax shelter is now, err, running the EU.

Hence the current European investigation into large companies and tax avoidance schemes has been carefully scoped to look for suspect tax deals between member states and individual companies, but to exclude "tax-competitive" arrangements that a country makes available to all companies.

[JeffyPoooh]

Luxembourg

Apparently I do quite a bit of business with companies located in Luxembourg.

Skype - it appears that my Skype payments are routed through Luxembourg.

Microsoft - I bought MS Office online from Microsoft, and I recall seeing the name 'Luxembourg' on the e-Receipt.

[Paul Crawford]

Re: Luxembourg

Funny that, I didn't think there was so much software writers and servers in what is basically a big city...

[Andrew Meredith]

Re: Luxembourg

Actually not even that big a city !!

[Adam Inistrator]

and that hell hole of financial iniquity Cyprus

o the irony