Brand-name companies' secret Luxembourg tax deals revealed

Landlocked European duchy a “magical fairyland” for global corporations seeking to slash their tax bills

By

 Updated:

Some firms have enjoyed effective tax rates of less than 1 percent on the profits they’ve shuffled into Luxembourg.

Shutterstock

Pepsi, IKEA, FedEx and hundreds of other international companies have secured secret deals from Luxembourg, allowing many of them to slash their global tax bills while maintaining little presence in the tiny Western European duchy, leaked documents show.

These 343 companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, according to a review of nearly 28,000 pages of confidential documents conducted by the International Consortium of Investigative Journalists and a team of more than 80 journalists from 26 countries.

The European Union and Luxembourg have been fighting for months over Luxembourg’s reluctance to turn over information about its tax rulings to the EU, which is investigating whether the country’s tax deals with Amazon and Fiat Finance violate European law. Luxembourg officials have supplied some information to the EU but have refused, EU officials say, to provide a larger set of documents relating to its tax rulings.

Today ICIJ and its media partners are releasing a large cache of Luxembourg tax rulings – 548 comfort letters issued from 2002 to 2010 – at www.icij.org and reporting on their contents in stories that will be published or broadcast in dozens of countries. It’s unclear whether any of these documents are among those still being sought by EU investigators, but they are the kinds of documents that go to the heart of the EU’s investigation into Luxembourg’s tax rulings.

“This is the first time really that we’ve seen inside the workings of Luxembourg as a tax haven,” said Richard Brooks, a former U.K. tax inspector and author of the book The Great Tax Robbery, who was hired by ICIJ to help review some of the leaked documents. “The countries . . . that are losing money, they don't know about it, don’t know how it operates at all.”

Among the key findings of the project:

  • Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies have secured secret deals from Luxembourg that allowed many of them to slash their global tax bills.
     
  • Companies have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes. Some firms have enjoyed effective tax rates of less than 1 percent on the profits they’ve shuffled into Luxembourg.
     
  • Many of the tax deals exploited international tax mismatches that allowed companies to avoid taxes both in Luxembourg and elsewhere through the use of so-called hybrid loans.  
     
  • In many cases Luxembourg subsidiaries handling hundreds of millions of dollars in business maintain little presence and conduct little economic activity in Luxembourg. One popular address – 5, rue Guillaume Kroll – is home to more than 1,600 companies.

Read the stories and explore all the documents at ICIJ.org