Walt Disney and Korch Industries have become the latest companies to be dragged into a political row over tax avoidance in Luxembourg under the watch of new European Commission president Jean-Claude Juncker.
New leaks suggest Disney and Korch, both headquartered in the United States, secured favourable tax deals in the Grand Duchy that may have saved them hundreds of millions of dollars in tax, renewing calls to crack down on multinational companies.
According to documents obtained by the International Consortium of Investigative Journalists, the two engaged in complex tax restructurings and channeled profits between 2009 and 2013 through Luxembourg subsidiaries where they enjoyed a lox tax rate.
The new leaks claim to reveal details about the sophisticated tax deals of more than 30 companies including Hutchison Whampoa and Skype, owned by technology giant Microsoft.
The new leaks follow earlier releases from the ICIJ which also included details about the tax affairs of Pepsi, Ikea, AIG, Fedex and 340 other multinationals. In some cases, companies enjoyed tax rates of less than 1 per cent on profits shifted to Luxembourg.
According to the ICIJ, the deals were negotiated by the so-called Big 4 accounting firms including PricewaterhouseCoopers, Ernst & Young, Deloitte and KPMG. Tax avoidance is legal, but companies which use complex structures to reduce their tax bills by shifting profits to low tax jurisdictions are coming under scrutiny.
Jean-Claude Juncker, the new president of the European Commission, who was prime minister of Luxembourg while many of the tax deals were sealed, has also faced criticism and was subjected to a vote of confidence at the EU Parliament in the wake of the Luxembourg leaks.
Luxembourg has repeatedly defended the country's tax structure, arguing it is “compliant with international and national law” while remaining competitive and attractive for businesses.
A Koch spokesperson said the group conducts its business lawfully and pays taxes in accordance with applicable laws. A Disney spokesperson told Reuters the report was misleading and said Disney's global tax rate has averaged 34 per cent over the last five years.
Microsoft added: "The acquisition of Skype was finalised in October 2011, so we can only speak to activities after that date. Post-acquisition, we reviewed and modified Skype's business model as part of the integration process. As a global business, Microsoft adheres carefully to the laws and regulations of every country in which we operate."
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