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FedEx named in Luxembourg tax revelations

LUXEMBOURG, GD: The new head of the European Commission, Jean-Claude Juncker, is now the focus of an investigation by the organization he runs following the release of documents that claim Luxembourg has provided a legal loophole for international companies to reduce their tax liability.

Juncker was the prime minister of Luxembourg from 1985 to 2013 and head of the country's Finance Ministry from 1989 to 2009.

Luxembour Finance MinistryAccording to claims by the International Consortium of Investigative Journalists (ICIJ), its six-month probe of 28,000 confidential documents has revealed 340 companies including IKEA, Pepsi, Deutsche Bank and FedEx "appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes".

Noting there's nothing illegal in the process, the ICIJ cites a document that purports to show the Memphis-based company set up two Luxembourg entities to move revenue from its Mexican, French and Brazilian operations to an affiliate in Hong Kong.

ICIJ says other companies involved in its investigation include Accenture, Abbott Laboratories, American International Group (AIG), Amazon, Blackstone, the Coach handbag empire, H.J. Heinz, JP Morgan Chase, Burberry, Procter & Gamble, the Carlyle Group and the Abu Dhabi Investment Authority.

In response to the ICIJ, a statement from Luxembourg's Finance Ministry said that while its behavior has been "totally legal", it acknowledged that since the Great Recession of 2008 "the legitimacy of certain mechanisms, which are compliant with international law, is put in doubt".

Finance minister Pierre Gramegna (behind lectern) said Luxembourg now "believes that it is not acceptable that companies take advantage of the international legal framework to avoid de facto all taxation" and the international community "needs to adapt to today's realities".

The ICIJ notes Luxembourg competes with other so-called tax havens including Gibraltar (UK), Delaware (USA) and Ireland. According to Citizens for Tax Justice, a Washington DC-based nonprofit research group, more than 170 companies on the Fortune 500 list have a Luxembourg branch including Apple Inc. that recently reported an increase in offshore profits of US$16 billion.

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