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.”
