Catarina Conti / Eric De Grasse
7 November 2014 – The International Consortium of Investigative Journalists (ICIJ) has published details on how four high-profile audit firms have been named-and-shamed as architects of a tax minimization structure used by hundreds of the world’s big-name companies, including a slew in the tech sector. The ICIJ has published details of how the structure worked, along with identifying many of the companies involved, here. Its “Luxembourg Leaks” investigation says PwC, KPMG, Ernst & Young and Deloitte help clients craft “an array of cross-border transactions” designed to cut clients’ tax bills (often to zero).
As noted in The Register review of the report:
“Luxembourg is a key player in this by allowing companies to negotiate secret tax deals that cover handling of royalties, treatment of inter-company loans, interest-free and micro-interest loans, hybrid loans (a way to realize profits as capital for tax purposes), “total swap return” arrangements, hidden contributions (attributing fees paid to one company to another company in a tax haven), and dodgy branch office tax treatments. The Luxembourg tax rulings are described by the ICIJ as being worth billions of dollars in taxes not paid by global firms”.
To read the ICIJ report click here.
And the ICIJ summary of the report quotes Francine McKenna (author of the must-read blog re: The Auditors which covers the accounting/auditing industry in exquisite detail) who says “these firms are supposed to be built on honor and integrity and being a watchdog, but they’re so big now it’s all about making money. They’re not worried about reputation, because all of this stuff has not affected their ability to get bigger and bigger and bigger.”
As the ICIJ online database shows, tech sector companies whose documents have been leaked to the ICIJ include Accenture, Apple, Amazon, Hutchison Whampoa, Intelsat, Vodafone, Verizon and many others.
Some of the arrangements had already come to light. Amazon, for example, is already under investigation over its Luxembourg tax deal.
And for an excellent video of how this all works, using IKEA as a case study, click below:
