This morning, splashed across the pages of The Guardian, an unprecedented investigation into the tax affairs of over a thousand companies by the International Consortium of Investigative Journalists has exposed the huge scale of tax avoidance through Luxembourg.
Based on nearly 30,000 pages of leaked documents, the investigation reveals how large multinational companies have created special corporate structures, with the approval of the Luxembourg government, that have allowed them to reduce their tax bills elsewhere. All of this is legal, but allows these companies to avoid paying their fair share of tax in the countries they operate in.
Poorer countries losing out
As well as leaking the internal tax affairs of well-known companies like Amazon, Ikea or Pepsi, the investigation reveals how some of the world’s poorer countries are losing out.
In one case, three Brazilian banks set up a complex system of financial transactions that allowed them to avoid nearly $90 million in taxes, according to an analysis of the leaked files by a Brazilian newspaper. This lost tax revenue could have a huge impact on public services, in a country where around 7.5 million people live on less than $1.25 a day.
Fundamental tax re-think needed
Responding to the investigation, ActionAid’s tax campaign manager, Murray Worthy said: “This exposure of the industrial scale of global tax avoidance run through Luxembourg clearly highlights the need for global action – but even the latest reforms by the G20 just tinkers around the edges of this broken system.
“This is a global issue. As well as the high street names, these files also expose how big businesses have been dodging millions of pounds of tax not just in wealthy countries, but also in the world’s poorer countries.
“A fundamental re-think of the world’s tax system is needed, that puts all the issues on the table and includes all countries, including developing countries, as equal partners, to tackle these kinds of abuse.
“The current plan of letting rich countries and tax havens like Luxembourg discuss amongst themselves how to make small changes to the tax system will not stop these scandals.”
Be part of the movement for a fairer tax system, by getting your community to support our Towns Against Tax Dodging campaign.