Luxembourg tax deals with global firms like Amazon under fire after leaks

Luxembourg was under fire Thursday after leaked documents revealed its huge tax avoidance deals with hundreds of top global firms, putting its former premier Jean-Claude Juncker under the spotlight in his first week as EU commission chief. Household names such as Pepsi, IKEA and Deutsche Bank were among companies named by the U.S.-based International Consortium of Investigative Journalists (ICIJ) following a six-month investigation of 28,000 leaked documents. Billions of dollars were funnelled through the tiny European duchy of Luxembourg thanks to complex financial structures that allowed companies to slash their tax liabilities, depriving hard-up governments around the world of vital revenue.

I want to underline that these (tax) rulings conform to international laws.

Luxembourg prime minister Xavier Bettel

The revelation comes at a particularly awkward moment for Juncker, who took office Saturday as head of the EU’s executive arm after 19 years as Luxembourg prime minister, during which many of the deals were made. Juncker guided the country from being a sleepy European backwater to a prized destination where hundreds of the world’s biggest companies now base their affairs. Juncker’s spokesman said the European Commission was already investigating whether Luxembourg’s tax deals with U.S. Internet shopping giant Amazon and the financial arm of Italian carmaker Fiat amounted to illegal state aid. The documents uncovered by ICIJ showed details of so-called Advance Tax Agreements — pre-negotiated deals which set out how companies will be taxed.

It’s like taking your tax plan to the government and getting it blessed ahead of time.

Richard Pomp, tax expert from Connecticut School of Law

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