International giants including Pepsi, IKEA and FedEx have saved billions in taxes by funneling money through Luxembourg, claims a report by the Washington, DC-based International Consortium of Investigative Journalists (ICIJ).
ICIJ, a global network of 185 reporters in 65 countries who collaborate on transnational investigations, reviewed 28,000 pages of leaked confidential documents to come up with its findings. According to the journalists’ report, big companies create a complicated accounting and legal structure that allows for movement of profits from high-tax countries to lower-tax countries – some with tax rates below 1 percent.
“The private deals are legal in Luxembourg but may be subject to legal challenges outside of the country,” says a Huffington Post article. The European Union has been going back and forth with Luxembourg over whether the country has to disclose tax deals that might violate European law.
As the EU probes continue, the multinational group the Organization for Economic Cooperation and Development is proposing new rules that would prevent companies from using common practices to shift profits into countries considered “tax havens.”