Tax avoidance sans frontières
Multinational tax dodging has finally become a top political issue across Europe. The European Commission is probing the terms of tax deals granted by Luxembourg, the Netherlands and Ireland to multinationals, including Apple and Starbucks, media reported in early November 2014.
The Commission’s President Jean-Claude Juncker will be relieved to see that after Luxembourg’s sweetheart deals for multinational companies were widely condemned (incidentally under his leadership as prime minister, Luxembourg offered generous tax breaks to around 340 multinational companies, allowing them to save billions of euros in taxes), the media have now zoomed in on the Netherlands for providing similarly preferential deals.
The German newspaper Frankfurter Allgemeine Zeitung wrote on 15 November 2014 that Starbucks, IKEA, Google and brewer SABMiller amongst others have set up companies in the Netherlands for tax reasons. It needs to be said though that SABMiller owns the Dutch brewer Grolsch. Still, in 2011, a report by the Organization for Economic Cooperation and Development (OECD) reckoned that more than USD 2.6 trillion flowed into Special Purpose Entities, also known as “letter box companies”, in the Netherlands – which amounted to three times the size of the Dutch economy – and about USD 3 trillion flowed out.
Tax authorities have also begun to home in on multinational brewer AB-InBev. On 13 November 2014 AB-InBev confirmed that Belgian tax inspectors are seeking to investigate a unit of the world’s biggest brewer. The probe was reported earlier that day by the Belgian newspaper De Tijd, which said that a tax agreement had allowed AB-InBev to transfer EUR 140 million (USD 175 million) of profit from the rest of the world over the past three years to a Belgian company that exists only on paper.
“AB-InBev complies with all fiscal rules and regulations in Belgium and other countries where it does business”, a spokesperson was quoted as saying.
The allegations concerning Luxembourg, the Netherlands and Ireland come after members of the U.S.-based International Consortium of Investigative Journalists published articles based on nearly 28,000 pages of leaked documents giving details of complex financial arrangements with Luxembourg that enabled companies to wipe huge amounts of taxes from their bottom lines. More than 80 journalists from 80 countries, working for newspapers including the Süddeutsche Zeitung, the Guardian and Le Monde, had slogged on the investigation, according to the ICIJ.
The ICIJ said its six-month investigation has shown that household firms such as Deutsche Bank, Pepsi and IKEA were among the companies to take advantage of the tax avoidance schemes, which involved hundreds of billions of dollars being funnelled through Luxembourg. Some of the companies had paid less than one percent effective tax on profits channelled through the country, it said.
All those methods may have been perfectly legal, yet far from ethically legitimate, media commentators say.
