Thursday, November 6, 2014

Report Finds Some of World’s Biggest Companies Use Tax Havens to Avoid Taxes

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.”

UBS Exec Acquitted of Helping Americans Evade $20B in Taxes

A former UBS AG executive Raoul Weil was found not guilty of conspiring with US clients to hide $20 billion from the IRS in secret international bank accounts. “Weil was the highest-ranking Swiss banker prosecuted under an IRS and Justice Department crackdown on Americans’ use of offshore accounts to dodge U.S. taxes,” reports the Associated Press.

The verdict comes as a blow to the US government, which has been increasingly pursuing international banks and Americans who use offshore accounts to dodge taxes. It also was surprising: In 2009 UBS paid a $780 million US fine for helping US citizens avoid taxes. The Swiss banking giant disclosed thousands of American account holder names, many of whom were later prosecuted by the IRS.

Testimony against Weil detailed the lengths to which the banker supposedly went in order to conceal wrongdoing. Weil allegedly kept sensitive client data under a “solitaire” game tab on an encrypted laptop with an emergency password that would delete any trace of the customer’s data if it was seen by the wrong person.

A DOJ spokesperson said that, despite the verdict, the US government will continue pursuing banks, and their executives, suspected of helping wealthy Americans avoid billions in taxes.

For more commentary on the verdict see Newsweek,  The Wall Street Journal and CNBC.