Italian firms struck secret Luxembourg tax deal

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Finmeccanica, the defense and industrial group, is among the Italian firms said to have struck secrets tax deals in Luxembourg. Photo: Leon Neal/AFP
10:59 CET+01:00
Finmeccanica and Unicredit are among the 340 international companies said to have struck secret tax deals in Luxembourg, allowing them to reduce global tax bills despite having little activity in the tax haven.

The companies, which included Pepsi, Ikea and Amazon, were exposed in documents leaked to the International Consortium of Investigative Journalists (ICIJ).

The ICIJ described the landlocked European duchy as a “magical fairyland”, with some companies paying a tax rate of less than one percent on profits, made possible through a complex structure that allowed them to funnel profits to Luxembourg from high-tax countries.

Other Italian firms on the list include Banca delle Marche, Banca Sella, IntesaSanPaolo, Ubibanca and Banca Popolare Dell’Emilia Romagna.

“A Luxembourg structure is a way of stripping income from whatever country it comes from,’’ Stephen E. Shay, a professor of international taxation at Harvard Law School and a former tax official in the US Treasury Department, told ICIJ.

The findings will put Jean Claude Juncker, Luxembourg’s ex-prime minister and the recently appointed chief of the European Commission, in a tricky position.

Juncker, who stepped into the EC post on November 1st, helped transform Luxembourg from an economy once based on farming and steel production to a low-tax haven for business.

He came into the EC position shortly after the commission expanded an inquiry into Luxembourg’s tax incentives, which included tax arrangements with Fiat Finance, a unit of the Italian car manufacturer, Apple in Ireland and Starbucks in the Netherlands.

But Luxembourg officials defended the country’s system.

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 “No way are these sweetheart deals,” Nicolas Mackel, chief executive of Luxembourg for Finance, a quasi-governmental agency, told ICIJ.

“The Luxembourg system of taxation is competitive – there is nothing unfair or unethical about it.”

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