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Luxembourg leaks: nation under spotlight over tax avoidance claims

Luxembourg leaks: nation under spotlight over tax avoidance claims
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Leaked documents have landed Luxembourg in hot water over claims of tax avoidance on an industrial scale.

Reporters claim that more than 300 multinational companies funneled hundreds of billions of dollars through the Grand Duchy, saving billions in taxes.

The International Consortium of Investigative Journalists examined 28,000 pages of leaked documents which detailed the special arrangements.

Some of the key findings implicate Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and almost 340 other companies over claims of securing ‘secret deals’ with Luxembourg to slash their tax bills.

The reporters claim that PricewaterhouseCoopers has helped obtain 548 tax rulings between 2002 and 2010. Many of those companies with addresses in Luxembourg had little economic activity in the country, yet one address – 5, rue Guillaume Kroll – housed more than 1,600 companies.

The findings also show that the deals appear to exploit international tax mismatches, allowing them to avoid taxes using hybrid loans.

The news comes at a delicate time for Jean-Claude Juncker, the EU Commission president, whose Commissioners started work this week. He was prime minister of Luxembourg at the time when many of the rulings were made.

The European Commission is already investigating whether Fiat and Amazon received irregular state aid from the country, though all companies have denied any wrongdoing.

Earlier this year Juncker defended Luxembourg’s tax system as being ‘in complete compliance’ with EU law.