By Tom Fairless
BRUSSELS--A cache of secret tax documents released Tuesday shed
further light on how Luxembourg has helped multinational companies
to lower their tax bills, in a second major leak that could
intensify pressure on European Union policy makers to close
loopholes that cost national governments billions in lost
revenue.
The latest documents, disclosed by the Washington-based
International Consortium of Investigative Journalists at late
evening local time in Brussels, show how 35 major companies,
including Walt Disney Co. and Koch Industries Inc., used complex
financial structures to funnel profits through subsidiaries in
Luxembourg, potentially avoiding taxes in other jurisdictions.
The latest leak puts fresh pressure on Jean-Claude Juncker, the
recently-appointed European Commission President who is leading the
bloc's fight against aggressive tax avoidance, but who was
Luxembourg's prime minister when most of these agreements were
struck.
Mr. Juncker survived a no-confidence vote by the European
Parliament last month over his involvement in Luxembourg's
controversial tax practices. But he admitted in an interview
published Tuesday that the scandal had weakened him
politically.
"I have been weakened because LuxLeaks suggests I participated
in schemes which don't follow the elementary rules of ethics and
morality," Mr. Juncker told French daily Liberation. Still, he
added, "everyone was at fault."
Sven Giegold, a European lawmaker and economic spokesman for the
Greens, said that unless Mr. Junker swiftly announced
"comprehensive proposals to tackle tax dumping and avoidance, his
position as Commission president will become untenable." He called
for an inquiry by the European Parliament into tax avoidance by
multinationals.
According to the ICIJ, one Disney subsidiary reported a pretax
profit in Luxembourg of more than EUR1 billion ($1.2 billion) over
four years, but it paid just EUR2.8 million of tax, a tax rate of
about 0.25%.
A spokeswoman for Disney called the disclosures "deliberately
misleading, " adding that "Disney's global tax rate has averaged
34% over the past five years." She said the Luxembourg arrangement
hadn't "meaningfully affected the taxes we pay in any jurisdiction
globally."
The ICIJ said the centerpiece of privately held Koch's tax
arrangements was an internal bank called Arteva Europe, which
managed the cash flows of the conglomerate's European operations
through Luxembourg. A Koch subsidiary paid $6.4 million in taxes on
$269 million in profit from 2010 through 2013, the group said.
Koch representatives couldn't be reached for comment.
Luxembourg's finance ministry criticized the "highly
questionable" way in which the latest documents were acquired, and
said tax avoidance by multinational companies couldn't be blamed on
one country alone.
The first set of leaked Luxembourg tax documents, published a
month ago, revealed details of deals negotiated by accounting firm
PricewaterhouseCoopers for more than 340 of the world's biggest
companies, including package-delivery company FedEx Corp. and
food-and-beverage giant PepsiCo Inc.
At the time FedEx and PepsiCo defended their practices, saying
they did nothing improper.
The latest batch of documents show that the other so-called "Big
Four" accounting firms--Ernst & Young, Deloitte and
KPMG--negotiated similarly aggressive tax deals in the Grand
Duchy.
Ernst & Young and PwC both said their tax advice was in
accordance with applicable laws, and that they couldn't comment on
individual cases because of client confidentiality. PwC said the
reports on its tax advice were "based on partial, incomplete
information, which was illegally obtained." Deloitte and KPMG
couldn't be reached.
Other companies that appear this time include Hong Kong-based
conglomerate Hutchison Whampoa Ltd. Hutchinson said it fully
complied with all applicable tax laws and regulations.
The disclosures come amid a determined push by governments,
particularly in Europe, to put an end to financial maneuvers that
allow multinational companies to shift profit to tax havens from
the higher-tax jurisdictions in which they are earned. Previous
efforts to curb tax avoidance and evasion have made painfully slow
progress, in part because all EU governments must sign off on
changes to the bloc's tax legislation.
In a move that neatly avoids that problem, the European
Commission, the EU's executive arm, opened investigations in recent
months into tax deals struck by four multinational companies that
it says received special treatment-- Apple Inc. in Ireland,
Amazon.com Inc. and Fiat SpA in Luxembourg, and StarbucksCorp. in
the Netherlands.
If those concerns are confirmed, the companies involved could be
forced to pay large sums in back taxes. As the enforcer of the
bloc's state-aid rules, the Commission can veto tax deals that are
deemed to represent government aid that favors some companies over
their rivals.
The EU's new competition commissioner, Margrethe Vestager has
said she would pursue the tax investigations as a matter of
priority. Ms. Vestager said last month that she considered the
first batch of Luxembourg documents as "market information" that
she could potentially use to launch further probes.
At a news conference Wednesday, a Commission spokesman called
for "more harmonization and coordination" among EU governments on
tax policies as a means of closing costly loopholes.
"Mr. Juncker is 100% behind the fight," he said.
Write to Tom Fairless at tom.fairless@wsj.com
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