The secret Luxembourg tax deals: 5 things you should know

Pepsi, IKEA (above), AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies secured secret deals from Luxembourg that allowed many of them to slash their global tax bills. -- PHOTO: AFP
Pepsi, IKEA (above), AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies secured secret deals from Luxembourg that allowed many of them to slash their global tax bills. -- PHOTO: AFP

Media around the world are reporting an expose by a US-based group of investigative journalists that hundreds of the world's largest companies have signed secret tax deals with the city-state of Luxembourg, saving them billions of dollars in taxes:


1. Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies secured secret deals from Luxembourg that allowed many of them to slash their global tax bills.

2. The deals were exposed by the International Consortium of Investigative Journalists (ICIJ), who investigated 28,000 pages of leaked documents that included 548 so-called comfort letters that the group said Luxembourg had provided to corporations seeking favorable tax treatment.

Journalist Anuska Delic tweetd: "Luxembourg Leaks. Possibly The Investigative Project of the decade."

3. The leaked documents involve secret deals negotiated by PricewaterhouseCoopers, one of the world's largest accounting firms, on behalf of hundreds of corporate clients. ICIJ says the private deals are legal in Luxembourg but may be subject to legal challenge outside the country.

PwC says ICIJ's reporting is based on "outdated" and "stolen" information, "the theft of which is in the hands of the relevant authorities." It said its tax advice and assistance are "given in accordance with applicable local, European and international tax laws and agreements and is guided by a PwC Global Tax Code of Conduct."

4. Companies 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 per cent on the profits they've shuffled into Luxembourg.

5. 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.