Disney and Microsoft dragged into Luxembourg tax avoidance scandal engulfing EU chief Jean-Claude Juncker
Grand Duchy accused of allowing multinational firms to pay virtually no tax
Leaked documents reveal more firms used Luxembourg to lower tax
There is no suggestion that the tax schemes used by firms are illegal
But scandal has dragged in Luxembourg’s former PM Mr Juncker
Giant US businesses Disney and Microsoft have been dragged into the Luxembourg tax avoidance scandal engulfing Brussels chief Jean-Claude Juncker after a slew of confidential documents were leaked.
The Grand Duchy is accused of allowing multinational firms to pay virtually no tax on massive profits – draining resources from countries forced to make drastic cuts to reduce their deficits.
The scandal has dragged in Mr Juncker – Luxembourg’s former Prime Minister. The new president of the European Commission, Brussels’ most powerful official, is under mounting pressure to explain the complicated tax deals struck while he was leader.
mong the new companies exposed in secret tax documents leaked to the Guardian are Disney, FTSE 100 firm Reckitt Benckiser and Skype – now owned by Microsoft. There is no suggestion that the tax schemes are illegal.
The documents were obtained by the International Consortium of Investigative Journalists.
Dozens of multinationals implicated in the latest leaks engineered complicated tax schemes which helped cut their tax bills.
The new revelations will step up the pressure on Mr Juncker who praised Luxembourg’s tax policies.
In 2005, when Mr Juncker was both prime minister and finance minister of Luxembourg, he said: ‘Skype will remain based here … this is partly because of the favourable fiscal environment we’ve created here in Luxembourg.’
Since being appointed to the top job in Brussels Mr Juncker has brushed off allegations that Luxembourg, under his leadership, engaged in ‘industrial scale tax avoidance’.
He said: ‘I am not the architect of the Luxembourg model because this model doesn’t exist.’
But according to the Guardian about 340 companies – including Fedex, Pepsi, Shire Pharmaceuticals, Icap and Ikea – secured special tax deals with Luxembourg.
Last week, Germany, France and Italy demanded a clampdown on Luxembourg-based tax avoidance.
They said: ‘Our citizens and our companies expect us to cope with tax avoidance and aggressive planning.’
Parliament’s spending watchdog chief Margaret Hodge said the revelations raised serious questions over Mr Juncker’s suitability to head up the European Commission.
She said: ‘Since I have uncovered all this I have questions about if Mr Juncker is fit to be the president of the European commission.
‘I think if this had been around during the period of his appointment it might well be a different decision.’
The companies named in the leaked documents said they had done nothing wrong.
Koch Industries said: ‘Like all Koch companies, Invista conducts its business lawfully, and pays its taxes in accordance with applicable laws. As the Guardian has previously acknowledged, all of our activities in these matters are legal.’
Microsoft, Skype’s parent, said: ‘Microsoft’s acquisition of Skype was finalised in October 2011, so we can only speak to activities after that date.’
The statement added that Microsoft had since changed Skype’s business model: ‘As a global business, Microsoft adheres carefully to the laws and regulations of every country in which we operate.’
It comes after Washington’s ambassador to the UK defended Google, Facebook and Amazon amid claims they were no playing by the rules on tax.
Matthew Barzun leapt to the defence of the giant corporations which have come under fire for their tax policies, saying they were simply following international tax rules laid down by governments.
David Cameron warned in October that multinationals which exploit loopholes to avoid paying UK taxes would be made to ‘damn well pay’.
The Treasury will today publish details of a new ‘Google tax’ designed to ensure that multinationals operating in the UK pay at least some tax here.
But Mr Barzun told journalists in Westminster it was wrong to describe the firms as ‘international tax dodgers’ despite the fact they pay little, if any, corporation tax in this country.
‘I’m not the spokesman for any of those great American companies,’ he said. ‘These companies and other companies… are clever about using international rules that exist, as written, by the way, by all of us – that’s US government, British government – we make these rules and they are playing by them.
‘And I hope that if and when rules change they will play by those new rules as well.’
Facebook is reported to have paid no corporation tax in the UK for the last two years. Google, which generated more than £3.5billion from the UK last year, paid just over £20million in corporation tax. And Amazon, which sold goods worth £4.3billion in the UK last year, paid just £4.2million.
The firms all insist that they are operating within the international tax rules. But their behaviour has sparked mounting anger in the UK.
Chancellor George Osborne announced last week that the UK will impose a new ‘diverted profits tax’ on corporations that seek to artificially shift their profits to low tax regimes abroad.
He said it would raise £1billion over five years. But experts warn that the so-called ‘Google tax’, whose details will be unveiled today, could prove fiendishly difficult to enforce.