
Leaked Documents Expose Global Companies’ Secret Tax Deals in Luxembourg - flexie
http://www.icij.org/project/luxembourg-leaks/leaked-documents-expose-global-companies-secret-tax-deals-luxembourg
======
simonebrunozzi
Help! On another, similar article, they have used one of my pictures, with me
and my wife in it - [http://www.euractiv.com/sections/competition/luxembourg-
tax-...](http://www.euractiv.com/sections/competition/luxembourg-tax-deals-
weigh-juncker-309805)

The only reason I think is because it was taken in front of the Amazon office
in Luxembourg.

Any suggestion on how to ask for removal, and possibly compensation for
damage?

~~~
jgrahamc
The image you are talking about appears to be:
[http://www.flickr.com/photos/25012939@N03/4196459317](http://www.flickr.com/photos/25012939@N03/4196459317)
on that image it says: "Some rights reserved" and when you click through you
are taken to [https://creativecommons.org/licenses/by-
sa/2.0/](https://creativecommons.org/licenses/by-sa/2.0/)

So, it appears you have the photograph available on the Attribution-ShareAlike
2.0 Generic Creative Commons license. The original story using your picture is
attributing it to you. So it appears to me that they've done nothing wrong.

If you want to ask them not to use it then there's a contact page:
[http://www.euractiv.com/contact](http://www.euractiv.com/contact)

~~~
vidarh
It's not necessarily that simple.

The European Convention on Human Rights, Article 8 grants a right to privacy.

It is not clear whether or not the right under copyright law to copy an image
is always sufficient to give you a right to _publish_ the image. That depends
on jurisdiction.

In the UK, for example, it does not, as a result of the way ECHR has been
implemented in local law through the Human Rights Act 1998, though courts have
to weigh Article 8 against Article 10 (freedom of expression) so it's not
clear cut.

EDIT: The EU Data Protection Directive, and it's member state implementations
(so in the UK the Data Protection Act, for example) also comes into play.

Consider e.g. that Google Street View was met with threats of lawsuits in many
European countries until the blurred out faces - while Google had the right to
take the pictures, and have the copyright to the images, privacy laws and
human right laws in many European countries did not give them automatic right
to publish those images.

~~~
honeybooboo123
> The European Convention on Human Rights, Article 8 grants a right to
> privacy.

The Fourth Amendment grants "the right of the people to be secure in their
persons, houses, papers, and effects, against unreasonable searches and
seizures", _except that it doesn 't_, as evidenced by "Aggressive police take
hundreds of millions of dollars from motorists not charged with crimes":
[http://www.washingtonpost.com/sf/investigative/2014/09/06/st...](http://www.washingtonpost.com/sf/investigative/2014/09/06/stop-
and-seize/)

The moral of the story here is that laws don't actually _grant_ any rights.
The rights we have are not bestowed upon us by governments, but are inherent
to all of us by virtue of being human.

Laws don't apply to the ruling class and their cronies and enforcers. You need
to see that _there 's no room for doubting that claim anymore_. Not after zero
Wall Street bigwigs have gone to jail for wrecking the world's economy, and
not when police officers are _actively_ just plain looting people.

Words on a piece of paper somewhere don't magically prevent people with
political power from abusing you in the here and now.

 __EDIT: Downvoters? Care to tell me how I 'm wrong? __

~~~
vidarh
Presumably you were downvoted because the comment completely derails from what
was under discussion. (EDIT: For what it's worth, I didn't downvote you, but I
did think it was a bit of a weird digression)

And while I agree with you in theory that "laws don't "actually grant any
rights", that's a matter of ideology. For all _practical intents_ , they do.

E.g. in the specific case of the European Convention on Human Rights, it has
the effect of granting rights by preventing signatories that have subordinated
themselves to it from enforcing laws that try to take those rights away. The
UK for example, have had parts of terror legislation struct down as a result,
and have complied.

~~~
honeybooboo123
Sure, it was a bit of a weird digression. But I figured it would be useful to
you.

> And while I agree with you in theory that "laws don't "actually grant any
> rights", that's a matter of ideology. For all practical intents, they do.

Practical intents? Well, here's a practical example: if laws actually
affected/defined rights, then the government could just pass a law that says
"it's alright to kill innocent bystanders", and _people would have no problem
with it_.

But we both know people would consider such a law illegitimate (and insane),
exactly because passing a law that says it's alright to kill people doesn't
actually make it moral to do so. In other words, rights are not defined by
laws, even in practice.

> it has the effect of granting rights by preventing signatories that have
> subordinated themselves to it from enforcing laws that try to take those
> rights away

So once a government signs a paper that says X, it can't sign another paper
that says not-X? Or alternatively, if a government promises it'll be good, it
_can 't_ then be bad?

If government A promises to be good, but is bad, will governments B, C and D
then invade A to force it to be good? Or will they go give A a stern talking
to? Or will they perhaps impose economic sanctions that hurt their own
economies too?

You see, signing a law that says a government will be good is nothing but PR,
_in practice_.

------
JetSpiegel
This is common knowledge for ages, good to see it properly proven.

However, it seems there's something else at play here when you realize Juncker
has just started his term as European Comission president, and the TTIP deals
going on. It seems fishy that this only appears now and with such fanfare.

~~~
return0
Well, now is the best time then. It's good to see on what ground the modern
european leaders are built.

Dont forget that germany officially punished Cyprus for doing similar things.

And lets not forget he is not an elected President

~~~
gutnor
European Union is a union in a UN sense rather than USA sense. There is no
European value or identity to defend, so neither Cyprus nor Luxembourg is
doing anything wrong really, just playing their card and do the best for their
citizen first and foremost.

Cyprus found itself in a hole with no good geopolitical bargaining chips so
they got screwed. All the argumentation that followed was to make the pill
easier to swallow for other EU citizen. Like "Look we are screwing them up and
it is scary but they are bad guys, so don't worry, that won't happen here."

Nobody is unhappy with Luxembourg right now, so nothing will happen. At best
politician in other countries will moan and complain about the various
_companies_ involved and maybe build up public outrage to justify extra local
taxation.

~~~
return0
>European Union is a union in a UN sense rather than USA sense

Are you from the EU? You do know that EU law supersedes national law, right?
Or that a number of southern european countries don't have control of their
finances for 5+years now?

It's not an inconsequential union.

Also, if they are not doing nothing wrong, then i don't know if the word
"wrong" has any uses anymore.

~~~
mike_hearn
EU law functions via directives, which are _implemented_ by governments into
local law. It's a little different to the US federal system.

Those southern European countries do have direct control of their own
finances. They could declare bankruptcy and start over if they wanted to. When
people say they are 'controlled' by Germany or whatever, those people are in a
lazy and misleading way saying that those countries preferred to get loans
from other countries and submit to those lenders requirements rather than
immediately make their spending match their tax revenues ... because borrowing
is easier, politically. But that's still a free choice they made.

WRT wrongness, you seem to believe that any country which charges a lower tax
rate than any other country is somehow immoral? You want a global government
that sets a single tax rate for every person and company on earth? That's one
way to avoid people playing jurisdictional arbitrage, but I don't see anyone
arguing for that.

~~~
return0
So in any case, EU is something a lot deeper than the UN.

Wrt to wrongness, yes, it is wrong that a small country takes advantage of the
openness and loopholes of global economies to funnel money in their direction.
There is a simple asymmetry at the core that thei exploit: a big democratic
country will never be able to lower corporate taxes because the
citizens/wealth generators will protest. A tiny dictatorship or otherwise tiny
country with no other resources will be able to convince its citizens that a
sustainable future can be built by leeching off funneled money made in other
countries. To me that is immoral

Or are you suggesting that any of these countries could survive financially
with such low tax rates without the foreign money?

PS. With respect to the amount of control over indebted countries government,
consider the case of Greece. Yes they could have opted out by voting in a
referendum, but when the prime minister proposed to do that he was deposed
overnight.

~~~
mike_hearn
Yes, the Greek people really really didn't want to see the Drachma come back.
They know that their corrupt and inefficient government would inflate away
their currency at a prodigious rate if they went back to having their own
currency and the rules imposed by the foreign lenders are really the best way
to reform their governments. Kind of messed up, but there it is.

Do you seriously think Luxembourg is actually some kind of third world state
that is only doing well because it has low corporation taxes? I think you
should review the economies of countries painted as tax havens before
concluding that. And of course big democratic countries can lower corporation
taxes. If the citizens prefer not to do that, OK, that's their choice, but
companies leaving is the expected outcome of that. It's not some kind of
immorality on the behalf of other citizens of other countries to exploit that.
Unless you're going to paint all Irish people as immoral, for example, which
is absurd.

------
prawn
Anyone got any ideas on how governments could effectively clamp down on this?

In Australia, IKEA paid 1%* tax over the last 12 years, even as sales surged
500%:

[http://www.theguardian.com/world/2014/nov/06/luxembourg-
tax-...](http://www.theguardian.com/world/2014/nov/06/luxembourg-tax-leaks-
put-pressure-on-g20-leaders-to-act-on-loopholes)

(The Guardian article has since removed the 1% reference, though it was in
there when I first read the article.)

~~~
higherpurpose
I'm not saying I condone it (I especially don't like the part of routing _all_
of your profits made in _other countries_ through a single country with lower
taxes, and don't think it's fair) - but maybe there's an argument to be made
about low income tax for corporations, if that actually leads to much higher
sales (on which consumers pay VAT, so tax money still goes to the government)?

~~~
ams6110
Lower tax rates, and simpler tax rules, often lead to higher revenues. Make it
easy to comply with the rules, set reasonable rates, and companies may find it
easier to deal with than setting up shell offices in another country and
employing teams of accountants and lawyers and bankers to shuffle the money
around.

------
flexie
This is the original article from the International Consortium of
Investigative Journalism, which uncovered the secret tax deals.

------
smoyer
Does anyone else read these articles and feel a tinge of jealousy? I'm hoping
that someday one of my businesses will generate the kind of money that would
make tax-hiding worthwhile.

As an aside, it's kind of nice to see the government's over-complicated tax
code used against them.

------
justcommenting
To the extent these types of activities are legal, I still hope we'll see the
media and customers increasingly--and visibly--questioning
corporate/managerial patriotism in situations like this.

------
return0
Love this. Would love to see similar stuff from Switzerland, Singapore,
Channel islands, UAE etc.

------
jayvanguard
I can totally see some CFO getting fired over this. For being NOT on the list.

------
Cthulhu_
I for one hope the countries in question will patch the tax holes, but not as
much as to make the companies evade to other countries. The national economies
would be vastly improved, at the expense of shareholder dividend.

~~~
mike_hearn
Well, this problem is fundamental to trying to tax entities that don't have
any specific location. Taxing people is quite simple because you can't split a
person up - just count the days they reside in a particular tax jurisdiction
and once it goes over a certain number of days per year, you say "you are
resident here, benefiting from our services, so pay us tax" and as long as
that number of days per year is reasonable, it all sort of works. And it feels
fair(ish) because people can vote, so they get to control what their tax money
is spent on, modulo lots of handwaving about how we all use insufficiently
good voting systems.

A company though, can be split up and spread around, and many modern companies
operate almost everywhere and yet nowhere in particular. That's very true of
internet companies that don't need any local presence to operate in a country.
Additionally they are seen as ideal tax targets by politicians because they
can't vote, and are often perceived as "foreign" even if the reality is rather
more complex, and people perceive tax on corporations to be free as the price
increases that it (theoretically) results in can't be distinguished from
general price rises due to inflation.

So we end up in a messy situation that suits nobody. Big companies exploit
their trans-national nature to try and get taxed in places that don't really
need the money like Luxembourg. Big countries try and exploit their size to
extract as much money as possible from the evil foreign capitalists,
regardless of where they may actually be based. Companies get taxed without
representation and we just sort of ignore this because we feel they can
already buy too much influence with politicians anyway, even without them
actually getting to vote on anything.

And in the end, governments still don't have enough money.

Economists who study this problem sometimes conclude that the best rate to set
corporation tax at is zero; they argue that "dead weight costs" of corporation
taxes are very high compared to most taxes and besides, ultimately the costs
get passed on to consumers. Of course this ignores the fact that business is
global but taxation and voting is still very local. What might make
theoretical sense in a textbook rarely seems sensible to the man on the
street.

~~~
tomp
> Companies get taxed without representation

Equating companies with actual people seems to be a uniquely american view
(also, complaining about "double taxation" of corporate profits). Personally,
I don't think those who pay the tax are those who "deserve" to vote or be
represented by politicians/laws. In my view, companies (and their investors)
have the _privilege_ of being able to profit by providing services to
citizens, and they should pay (be taxed) for this privilege.

~~~
mike_hearn
I'm not American and don't live in America, so I guess you need to rethink
that bit. Companies are clearly not people. If they were, they wouldn't be
able to go jurisdictional shopping so easily.

Taxation without representation is pretty widely recognised as problematic
though. Not for nothing did it help trigger the war of independence against in
the colonies against the British. Think about it: if you can't influence
politicians in any way, what stops them taxing 100% of your labour? The only
thing that stops governments doing this at the moment is the fear of
consequences from their citizens: either at the ballot box in democracies or
at the hands of the mob in dictatorships. Companies can't vote and they can't
rebel, so there has to be _some_ kind of pressure that pushes back against
ever higher taxation. Usually this is indirect: countries fear that if they
tax companies too much, they'll go bust, people will lose their jobs, and then
those people will vote.

But when companies are largely distributed and a government doesn't feel any
real exposure via their own population, the natural tendency is to say "if you
want to sell to our citizens, you have to pay us lots of tax" and there's not
much a company can do about it except simply deny an entire population their
services, which is about as useful a response as a person deciding the best
way to lower their tax bill is to throw themselves off a bridge. Nobody wins
in this situation!

> In my view, companies (and their investors) have the privilege of being able
> to profit by providing services to citizens, and they should pay (be taxed)
> for this privilege.

Since when is the ability to make a profit by engaging in trade a "privilege"?
People were doing that in the earliest tribes and farming settlements where
the closest thing to a government was the local alpha male. The privilege of
taxation is one people grant to governments in return for the stability and
ability to make long term plans that they provide; but that privilege can be
revoked and has been throughout history.

~~~
tomp
> Taxation without representation is pretty widely recognised as problematic
> though.

Obviously, but here we're talking about _people_ having no representation -
not companies.

> "if you want to sell to our citizens, you have to pay us lots of tax"

No country that I know of demands "lots of tax". Usually, they just want to
receive their "fair" share of tax - e.g. 20% on the profits on the products
sold in the country/to the citizens. That's not outrageous, and companies
still increase their profits by serving the market. Of course, companies and
governments might disagree on what is a "fair" tax, but basically, this just
means "as much as local companies are paying" (otherwise, being foreign
amounts to having an unfair competitive advantage).

> Since when is the ability to make a profit by engaging in trade a
> "privilege"? People were doing that

 _People_ engaging in trade is not a privilege. _Companies_ , however, is!
There are many benefits of forming a company, if nothing else the legal
structure (profits can be legally distributed in predetermined ways),
liability protection, and (probably the most important of all) immortality.

~~~
mike_hearn
I don't see such a huge distinction between people and companies as you do.
Companies are just groups of people working together. They aren't totally
alien things.

Governments always claim that their tax is "fair", that doesn't mean anything.
We have to evaluate fairness ourselves. In this case, what does "fair" mean?
People tolerate taxation because they get something back from it. That's it -
that's the only reason. It's not because politicians or governments have some
natural right to exist, it's because the benefits outweigh the costs (again,
in theory, ignoring that no government is even close to perfectly
representative).

But what benefits do companies get from the tax they pay? The answer is, very
few and nothing on the scale as what people get. Companies don't use roads or
schools or hospitals, their employees use those and they already pay tax.
Companies can use the courts, but they usually have to pay for that at the
point of use, they don't qualify for legal aid or anything like that. They can
also benefit from things like copyrights or patents, except these days at
least in the tech sector patents seem more of a cost than a benefit. I'd
happily opt my company out of that "benefit" if I could. They certainly are
not immortal, companies go bust all the time.

Meanwhile, people that can't afford to play the game and make deals with
Luxembourg can easily lose out badly in your so-called fair world. A few
people form a company and start selling some products. 20% of the sale price
goes to the government where the customer was based. But then, in the absence
of double taxation treaties, the government where the company is based (if
there is a single such place) would take another 20%. Then when the company
actually pays the people who did the work, those governments might take
another 20-40%.

0.8 * 0.8 * 0.7 (let's say 30% personal income tax) == 0.448, in other words
you ended up losing _most_ of the money you earned _just_ to corporation and
personal income tax. That's before including things like employment taxes,
taxes on property and so on.

This provides a powerful incentive to simply not sell to other countries at
all, and this makes everyone poorer. Which is why there are double taxation
treaties. But once you have those, you have to accept that other countries
will have different opinions about tax and different needs, and trying to
slice up the cake will inevitably result in big fights and compromises.

~~~
tomp
Hm... again, I think we disagree fundamentally about why taxes are the way
they are. Let me explain the way I see it.

A government, its taxes and the public services it offers (firefighters,
courts&police, mandatory vaccination, schooling, etc) are a great solution to
a prisoner's dilemma that people face: "Why should I contribute for the fire
department, when my neighbors will?" Then, a house somewhere caches fire and
the whole city burns down, because no one was willing to pay for a single fire
truck.

Then, the question is not, "how much does a single person benefit from a
specific service", but more "how much does the society benefit" \- _everybody_
benefits _a lot_ \- less revolutions, less famine, less epidemic illnesses,
less crime. How should we finance this? The answer almost all countries
converge to is _progressive taxation_ ; it makes sense, really, as those who
have the most also have the most to loose. What should we tax? Most countries
tax income, sales (VAT), and profits/dividends; also specific goods (e.g.
tobacco), capital gains/interest, and property. Most of these are IMO good -
sales tax is very progressive (those who have more -> consume more -> pay more
tax), tobacco tax discourages smoking (a lot of external costs, especially in
countries with public health system), property tax promotes effective use of
land and is progressive as well, as are capital gains/interests taxes.
Personally, I would reduce income tax, and raise profits/dividend tax (as
those who work tend to be poor, those who own tend to be rich), but that's
just me.

AFAIK, taxes don't work the way you think they do - sales tax is really VAT,
so you don't pay 20% (you only pay 20% of the added value you create, which
for most businesses is a much lower percentage of revenue) - also, income tax
is applied before tax on profits (employee salary is a cost to the business),
and for most people it's quite a bit lower than 30% (i.e. for the poor, those
who spend most of their paychecks on basic goods). Tax on profits is in many
jurisdictions completely optional - the owners could very easily elect to pay
no tax on profits (only tax on dividends, which is in line with income tax),
but then they would have unlimited liability. Tax on profits is basically the
price of buying limited liability.

I'm not saying there should be no double tax treaties - there should be, of
course, but companies should not be able pay less tax on the profits generated
within one country, just because taxes in the other country are lower.

~~~
mike_hearn
_Then, a house somewhere caches fire and the whole city burns down, because no
one was willing to pay for a single fire truck._

Yes tax is often to used to pay for public goods, though fire isn't a perfect
example because in some parts of the world actually fire protection is
considered a product that you buy from the government and you actually can opt
out of it. In that case if your home catches fire the fire fighters will turn
up and do only as much work as needed to stop it spreading, but they won't
bother trying to save your home:

[http://www.huffingtonpost.com/2010/10/04/firefighters-
watch-...](http://www.huffingtonpost.com/2010/10/04/firefighters-watch-as-
hom_n_750272.html)

That story is pretty brutal, especially if they really did forget to pay the
fee and not merely decide to opt out, though it's hard to know after the fact
of course. But it is possible and it does happen.

Still, there are lots of other examples of public goods funded via taxation
and vaccination is a good one.

One point of terminology confusion here: sales tax and VAT are not the same
thing. Sales taxes usually only apply when goods are sold to a consumer at
retail. VATs apply at all parts of the supply chain and have rules in place to
charge tax only on the value delta. America uses sales tax, I think most other
places (and certainly Europe) use VAT. It's very confusing to claim they are
the same thing. Additionally sales taxes are not normally described as
progressive - it's the opposite, they are considered _regressive_ :

[http://en.wikipedia.org/wiki/Sales_tax](http://en.wikipedia.org/wiki/Sales_tax)

(see the "effects" section)

... because the rate is the same no matter what your income is. Rich people
don't necessarily consume more: they can choose to consume the same amount as
poorer people and often do just because many goods are pretty uniform. I.e.
rich people tend to use the same smartphones as middle or even lower income
people. They don't use smartphones that cost 10,000x as much even if that's
how much more they earn.

 _I 'm not saying there should be no double tax treaties - there should be, of
course, but companies should not be able pay less tax on the profits generated
within one country, just because taxes in the other country are lower._

Companies don't generate profits within a country, they generate sales, and
they already pay the local rates of sales tax or VAT. Attempting to bodge this
arrangement is why politicians are always screaming about how unfair profit-
shifting is, but it's fundamental - how do you define where a profit is made?
Deciding where a _sale_ is made is not too hard because you can identify the
location of the person who bought the good or service, or where the business
is headquartered, but when you add up all the profits from these sales which
country gets to help themselves? Consider Google. Is their profit made in
California because that's where they were founded and where the brains of the
search engine are made? Or Ireland, because that's where the sales people were
made? Or Switzerland because there's an office there that contributed a nifty
feature that increased profits? How much does each country contribute towards
a companies profit? Trying to figure this out is a mugs game, it's entirely
arbitrary, which is why companies can game it so easily by having subsidiaries
license IP from each other and so on - who can really say what arrangement is
correct?

In theory, in the EU, it's simple: profit is booked where the company is
headquartered. Same thing for the USA, hence all the companies registered in
Delaware, a notorious tax haven. Sometimes you can't arrange things in this
way because you need / want to operate outside that trading bloc, this is when
you start getting subsidiaries that pay their parent companies huge licensing
costs for IP or the brand, but really it's just about moving profits to where
the company wants them to be.

------
firstaccount
link to the docs? Probably an interesting read.

~~~
firstaccount
[https://s3.amazonaws.com/iw-
files/apps/2014/12/luxleaks/sear...](https://s3.amazonaws.com/iw-
files/apps/2014/12/luxleaks/search.html?country=&q=&x=10&y=9)

