TaxCorporate TaxBig Four implicated in Luxembourg tax row

Big Four implicated in Luxembourg tax row

Controversy around tax affairs of multinationals reaches Big Four

THE CONTROVERSY surrounding Luxembourg’s accommodation of multinationals’ attempts to drive down their tax bills has spread to the Big Four.

Initially centring on PwC and hundreds of large multinationals, KPMG, Deloitte and EY have now been implicated in the escalating row.

This week, the Public Accounts Committee accused pharmaceutical company Shire and PwC of “scamming the British people” over the company’s business structure.

The drug manufacturer was named by the International Consortium of Investigative Journalists as one of hundreds of businesses with structures centred on low-tax Luxembourg.

The investigation unearthed a cache of almost 28,000 documents describing tax deals struck with Luxembourg, showing the tiny EU state was facilitating more than 1,000 multinationals in tax avoidance activities. Those arrangements – which are entirely legal – were signed off by the Grand Duchy. The leaked documents primarily related to clients of PwC, but all of the Big Four have now been linked to the practice, the Guardian reports.

An additional 35 businesses including Skype and Koch Industries – separate from the previous leaks – were involved in aggressive tax schemes in Luxembourg, the paper reported.

The broadening scandal has now reached former Luxembourger premier and current European Commission president Jean-Claude Juncker (pictured), whose regime is now suspected of accommodating tax avoidance on an industrial scale, rather on a more selective ‘sweetheart deal’ basis.

He has denied any wrongdoing, and said last month that he is “not the architect of the Luxembourg model because this model doesn’t exist”.

KPMG said in a statement: “KPMG International has a comprehensive, robust and publicly available global code of conduct setting the standards of ethical conduct for everyone at KPMG member firms. Tax professionals are also subject to KPMG’s global tax principles, which set out additional fundamental ethical principles and behaviours. The code and principles clearly state that we should act lawfully and with integrity and expect the same from our people, clients and other parties with whom we work.”

During the PAC hearing this week, PwC’s head of tax Kevin Nicholson said that Luxembourg “encourages finance operations in the same way the UK encourages R&D operations. These structures are multi-purpose and beneficial for things such as mergers and acquisitions.”

For its part, EY said in a statement: “Professional standards, as well as privacy laws, require that EY safeguards confidential client information. We take these obligations very seriously and fully investigate any breach of confidentiality.

“EY professionals provide independent tax advice to clients in accordance with national and international law. This includes advice on compliance with tax regulations in the territories in which they operate.”

Deloitte’s Luxembourg arm said in a statement: “We are bound by and work in accordance with the complex laws and regulations created by governments as we assist our clients in effectively managing their tax affairs. We also apply a strict code of conduct that ensures ethical safeguards in the work we do for our clients.

“Most EU member states, including Luxembourg, make it possible to obtain an advanced analysis, by tax authorities, of specific contemplated tax transactions to provide legal certainty and predictability for both the taxpayer and the state through confirmation of the application of existing national and international tax laws. Professional standards preclude us from commenting on client matters.”

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