McDonald's sues former CEO for lying about sexual relationships

Yahoo – AFP, DANIEL LEAL-OLIVAS, August 10, 2020

McDonald's said former CEO Steve Easterbrook "destroyed information
regarding inappropriate personal behavior"

Fast-food giant McDonald's announced on Monday it is suing former CEO Steve Easterbrook for lying about allegedly inappropriate sexual relationships with employees.

Easterbrook was dismissed in November 2019 over his "poor judgment" in engaging in a consensual relationship with a member of staff in violation of company policy.

McDonald's said it had subsequently learned that Easterbrook lied "and destroyed information regarding inappropriate personal behavior" and relationships with three other employees, as well as providing stock worth hundreds of thousands of dollars to one of the employees.

The chain is seeking to recover compensation and severance benefits paid to the executive under the terms of his departure last year, according to a securities filing.

The lawsuit, which alleges that Easterbrook committed fraud by misleading the company over the separation agreement, has been filed in a state court in Delaware.

"(He) was knowingly untruthful with McDonald's investigators," says the complaint.

Easterbrook's separation agreement included six months' severance pay, plus stock options.

Steve Easterbrook, pictured here in July 2016, was CEO at McDonald's from
March 2015 to November 2019

US media reports have estimated his exit package at around $40 million.

In 2018, Easterbrook's base pay was $1.3 million and his total compensation including bonus and stock options was $15.9 million.

He was replaced by Chris Kempczinski, who joined McDonald's in October 2015 after working in a senior strategic role at Kraft Foods and previously at PepsiCo.

One day after Easterbrook's departure, McDonald's announced that its top human resources executive, David Fairhurst, who joined McDonald's in 2005 and was named chief people officer at the restaurant chain in 2015, had also left.

In May, an international group of labor unions filed a complaint against McDonald's for what it called systematic sexual harassment at the fast food chain's restaurants around the world.

The complaint, filed with the Dutch national contact point for the Organization for Economic Cooperation and Development (OECD), was the first of its kind to target a multinational company, the International Union of Foodworkers said.

The document cites witness testimony of "attempted rape, indecent exposure, groping, and sexual offers."

McDonald's said at the time it would review the complaint, stressing that the food giant was a "people-first company."

Panama Papers showed vulnerability of whole system: Panama president

Yahoo – AFP, May 3, 2016

Panama's President Juan Carlos Varela delivers keynote address at a luncheon
during the Washington Conference on the Americas at the State Department on
May 3, 2016 in Washington, DC (AFP Photo/Mandel Ngan)

Washington (AFP) - The scandal triggered by the Panama Papers leak of information on how and where the world's wealthy stash funds to avoid detection or taxes underscored many countries' vulnerabilities, President Juan Carlos Varela said Tuesday.

Speaking at the State Department in Washington, the Panamanian president said the documents "reveal a worldwide problem, that involves many countries with legal and financial institutions" vulnerable to actions "that are not in the public interest."

Mossack Fonseca's founder lawyer Ramon

 Fonseca is a friend of Panama's President 

Juan Carlos Varela (shown here) and, until 

March, served as a senior advisor in his 

cabinet (AFP Photo/Rodrigo Arangua)

To that end, countries need to improve transparency and information sharing, Varela argued.

"We urge the international community to maintain a respectful dialogue through diplomatic channels," he added.

Panama and the United States last week signed an agreement on sharing of back account information in a step Panama's finance minister hailed as proof of his country's cooperation in fighting tax evasion.

The bilateral agreement comes weeks after the Panama Papers, a series of reports around the world revealing how one Panamanian law firm set up offshore entities to help the world's wealthy stash their assets.

Following the revelations, Panama has come under intense international pressure to open its financial sector to greater transparency or risk being put back on a global "tax haven" blacklist.

While the government has long said it is committed to that goal and has made some reforms in that direction, it has so far not signed up to an international standard on automatic sharing of tax information set by the Organisation for Economic Cooperation and Development.

Panama's President Juan Carlos Varela, left, sits with Singapore's President 

Tony Tan, right, for a meeting at the Istana or presidential palace on Friday, 

April 22, 2016, in Singapore. (AP Photo/Wong Maye-E)

Related Article:

Switzerland, Singapore join clampdown on bank secrecy (Update)

'Panama Papers' law firm under the media's lenses

Yahoo – AFP, Juan José Rodríguez, April 4, 2016

Revelations from a massive dump of leaked data from Mossack Fonseca's servers
 detailing how the world's wealthy -- politicians, footballers and some criminals --
used its lawyers to set up offshore companies is sending shock waves around
the world (AFP Photo/Rodrigo Arangua)

Panama City (AFP) - The law firm at the heart of the "Panama Papers" scandal was in lockdown on Monday, with private security guards keeping a small but growing pack of news photographers and cameramen at bay.

The bland, mirrored exterior of the building housing the Mossack Fonseca firm in Panama's main banking zone sits back upon a tidy lawn.

Half a dozen journalists trained lenses on it from the sidewalk. There were no police officers in sight.

Revelations from a massive dump of leaked data from Mossack Fonseca's servers detailing how the world's wealthy -- politicians, footballers and some criminals -- used its lawyers to set up offshore companies is sending shock waves around the world.

One of Mossack Fonseca's two founders, Ramon Fonseca, on Sunday told AFP the leak of 11.5 million documents from his firm was the result of a "limited hack."

But he said publishing the information from it was a "crime" because "each person has a right to privacy, whether they are a king or a beggar."

He also claimed it was an attack on Panama, "because certain countries don't like it that we are so competitive in attracting companies."

The Panama Papers: key facts on the huge journalists' investigation into tax 

evasion (AFP Photo/Thomas Saint-Cricq, Philippe Mouche)

Panama 'regret' over leak

Panama's foreign minister and vice president, Isabel De Saint Malo, said on her Twitter account on Monday as she was visiting Italy: "We regret (the) news at a global level that is affecting Panama."

Her government has sought to rid the Central American nation of a reputation as a hub for shady transactions helping money launderers and tax avoiders.

The government has vowed to cooperate "vigorously" with any judicial requests that might emerge from the scandal.

But while Panama has managed to get off an international money-laundering blacklist, its foot-dragging over lifting banking secrecy and automatically exchanging client financial information has kept it in the sights of other nations, particularly the US and in Europe.

De Saint Malo reiterated that her country had taken "drastic" steps to improve transparency and put some restrictions on the creation of offshore companies.

Reforms include cracking down on the use of bearer bonds -- shares that are owned by whoever physically holds the paper -- as well as regulating free-tax zones, casinos, property, construction and money-change firms.

OECD pushes Panama

View of a sign outside the building where 

Panama-based Mossack Fonseca law firm

 offices are placed in Panama City on 

April 3, 2016 (AFP Photo/Rodrigo Arangua)

But the Organization for Economic Cooperations and Development (OECD) says Panama has not gone far enough in meeting international standards on reporting financial information to other jurisdictions.

The head of the OECD's tax policy center, Pascal Saint-Amans, said on Sunday that "Panama has become the most opaque place on earth."

On Monday, the OECD's secretary general, Angel Gurria, said: "The 'Panama Papers' revelations have shone the light on Panama's culture and practice of secrecy. Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities."

Gurria, a Mexican economist, noted that, while the leaked data exposed "nefarious activities," they also showed a decline in the use of offshore companies and bearer bonds, which he attributed to the OECD's campaign against tax havens.

He said a G20 meeting of finance ministers from the world's top economies in London next month "will be critical" in eradicating banking secrecy and tax evasion.

'Panama Papers' law firm under the media's lenses https://t.co/m8gCZ9ZGz5 pic.twitter.com/2wNv9zcKuz

— AFP news agency (@AFP) April 4, 2016

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Switzerland, Singapore join clampdown on bank secrecy (Update)

Hundreds of large firms paying no tax in Australia

Yahoo – AFP, December 17, 2015

Some 600 of the biggest firms operating in Australia, including Qantas and
Glencore, paid no income tax in the 2013-14 financial year, data shows
(AFP Photo/William West)

Sydney (AFP) - Some 600 of the biggest firms operating in Australia, including Qantas and Glencore, paid no income tax in the 2013-14 financial year, data showed Thursday as the government vowed to keep targeting loopholes.

There has been a global push, including in Australia, for large local and multinational companies to stop using sophisticated structures to avoid or lower their tax payments, which has seen governments lose billions in revenue.

The tax details of around 1,500 large corporations were released by the Australian Taxation Office as a "step forward in improving corporate tax transparency", its Commissioner Chris Jordan said in a statement.

While Jordan said companies that did not incur a tax bill were not necessarily avoiding payments, he warned multinational firms -- some of which fronted a parliamentary inquiry this year on tax minimisation -- that their "aggressive arrangements" would be scrutinised.

"Some of these foreign-owned companies are overly aggressive in the way they structure their operations," he said.

"We will continue to challenge the more aggressive arrangements to show that we are resolute about ensuring companies are not unreasonably playing on the edge. If they do, they can expect to be challenged."

Britain in March introduced a so-called "Google tax" on firms that divert profits overseas, while Australia recently passed a law to lift transparency requirements that would also see disclosures required for private companies with turnover of Aus$200 million (US$144 million).

The data showed that Apple raked in Aus$6.2 billion in total income in Australia for the 2013-14 year, but only had a taxable income of Aus$247.4 million and a tax bill of Aus$74.1 million.

Swiss commodity giant Glencore booked combined revenue of some Aus$17.4 billion for the same period for three reporting entities, but paid no tax for any of them.

Likewise, Australian carrier Qantas and oil and gas company ExxonMobil Australia were among other household names that made billions in total income but paid no tax for 2013-14.

Assistant Treasurer Kelly O'Dwyer said Australia had worked with the G20 and Organisation for Economic Cooperation and Development to close the tax loopholes of multinationals, and had strengthened the powers of the ATO.

"It is critically important that multinational... companies are paying their fair share of tax and that's why the government has been very quick to lead this debate through the G20," she told reporters Thursday.

Opposition Labor senator Sam Dastyari, who chaired the tax inquiry, said the data supported the need for "tougher laws to crack down on this type of behaviour".

Why France, pioneer against foreign bribery, has convicted zero firms

Yahoo – AFP, Eric Randolph, 12 Oct 2015

France has failed to convict a single company for corruption abroad since an

 international anti-bribery convention came into force 15 years ago, and some critics

say it is now time to American-ise the judicial system (AFP Photo/Patrick Kovarik)

Paris (AFP) - France has failed to convict a single company for corruption abroad since an international anti-bribery convention came into force 15 years ago. Some critics say it is now time to American-ise the judicial system.

Last year, French power company Alstom agreed to pay a huge $772-million (688-million-euro) fine for bribing officials all over the world, including in Egypt, Indonesia and Saudi Arabia.

But the record fine headed straight into the coffers of the United States Department of Justice, which carried out the prosecution.

In 2014, French power company Alstom

 agreed to pay a huge $772-million fine in

 the US for bribing officials all over the

 world, including in Egypt, Indonesia and

 Saudi Arabia (AFP Photo/Jean-Sebastien

 Evrard)

"It's humiliating for everyone in France that our judiciary is not capable of doing the work themselves," said Daniel Lebegue, president of the French arm of non-governmental anti-corruption group Transparency International.

France pushed hard for the 1999 convention against foreign bribery at the Organisation for Economic Cooperation and Development (OECD), but Paris has been consistently criticised in its reports ever since.

Only seven individuals have been convicted for minor infringements, with the biggest fine just 20,000 euros ($22,500).

The only French-led conviction against a whole company -- aerospace giant Safran -- was overturned on appeal in January.

"France was one of the pioneers of the anti-bribery convention when it was negotiated, it would therefore be logical to see more results in terms of convictions," was the diplomatic assessment of Patrick Moulette, the OECD's head of anti-corruption, in a recent interview with AFP.

A spokesman for the French justice ministry said there had been efforts to increase enforcement, with 24 cases opened for corruption abroad between 2012 and 2014, but did not comment on the lack of convictions.

'Lack of political will'

The only French-led conviction against 

a whole company -- aerospace giant 

Safran -- was overturned on appeal in

January (AFP Photo/Frank Perry)

Some say France just isn't trying hard enough.

"The law that France has in place is largely sufficient and in many ways better than other countries, including the US," said Severin Wirz of TRACE International, a US-based anti-corruption business association.

"The issue isn't so much the law as the lack of political will of the enforcement agencies, and the lack of financial resources, staff, experience and knowledge," he said.

But many point the finger at a critical missing instrument in France's judicial toolbox: US-style negotiated settlements.

Out-of-court settlements allow companies to accept fines and monitoring programmes to avoid the ruinous publicity and expenses of a trial.

Also known as "deferred prosecutions", settlements were invented for youth drug crimes in the 1970s in a bid to keep children out of prison.

Graphic on Transparency International's

 2014 Corruption Perceptions Index 

(AFP Photo)

They were recycled by US prosecutors in the 1990s to crack down on corruption without permanently destroying businesses by dragging them through the courts.

Major international prosecutions, including Alstom, have been settled in this way. Britain, Germany and Switzerland have also boosted their success rates against bribery by introducing settlements.

Transparency International recently called for France to do the same.

"Experience shows negotiated settlements are much faster, much simpler for the company and therefore much more effective," said Lebegue.

'Must change behaviour'

But the idea still sits uneasily with some Europeans, who fear settlements are a way for companies to buy their way out of trouble.

"Alstom may have been given huge fines, but the managers who should ultimately be held liable for the behaviour are still in their posts," said Laetitia Liebert of Sherpa, a Paris-based non-governmental organisation of lawyers that is studying how France should change its bribery laws.

"We are not against settlements in France, but we must be sure they change the behaviour of companies and lead to greater accountability. Otherwise, companies will just see them as a cost of doing business," she said.

Moulette, the OECD's anti-corruption chief, agreed that settlements "cannot be the answer to everything".

He said there were clear signs France was taking the challenge more seriously, appointing a national financial prosecutor last year, and launching further reforms this autumn.

In July, Finance Minister Michel Sapin vowed to replace the current anti-corruption body, which has minimal investigative powers, with something more aggressive.

France pushed hard for the 1999 convention against foreign bribery at the 

Organisation for Economic Cooperation and Development, but Paris has been

consistently criticised in its reports ever since (AFP Photo/Eric Piermont)

It said this would include monitoring of companies "inspired by Anglo-Saxon procedures."

"We can only hope the new bodies are more active and efficient, with more specialisation, and the OECD stands ready to work with the French authorities to improve the law on foreign bribery," said Moulette.

"That was a big part of the problem in the past -- it's such a specific form of criminality you need the right type of resources and expertise, both in quality and in quantity."

Africa losing billions from fraud and tax avoidance

First African initiative to address illicit outflows says governments, multinationals and crime deprive poor countries of crucial services

The Guardian, Mark Anderson, 2 February 2015

A party political billboard along a Lagos highway. Nigeria’s crude oil exports are
 often mispriced, according to a new report. Photograph: Pius Utomi Ekpei/
AFP/Getty Images

Africa is losing more than $50bn (£33bn) every year in illicit financial outflows as governments and multinational companies engage in fraudulent schemes aimed at avoiding tax payments to some of the world’s poorest countries, impeding development projects and denying poor people access to crucial services.

Illegal transfers from African countries have tripled since 2001, when $20bn was siphoned off, according to a report released by the African Union’s (AU) high-level panel on illicit financial flows and the UN economic commission for Africa (Uneca).

The report was praised by civil society groups as the first African initiative to address illicit outflows from the continent.

In total, the continent lost about $850bn between 1970 and 2008, the report said. An estimated $217.7bn was illegally transferred out of Nigeria over that period, while Egypt lost $105.2bn and South Africa more than $81.8bn.

Trade mispricing, payments between parent companies and their subsidiaries, and profit-shifting mechanisms designed to hide revenues are all common practices by companies hoping to maximise profits, the study said.

Nigeria’s crude oil exports, mineral production in the Democratic Republic of the Congo and South Africa, and timber sales from Liberia and Mozambique are all sectors where trade mispricing occurs.

Former South African president Thabo Mbeki, who chairs the panel, said: “The information available to us has convinced our panel that large commercial corporations are by far the biggest culprits of illicit outflows, followed by organised crime. We are also convinced that corrupt practices in Africa are facilitating these outflows, apart from and in addition to the related problem of weak governance capacity.”

Criminal networks engaged in drugs and human trafficking, animal poaching, and theft of oil and minerals also contributed to money leaving the continent.

Reducing these losses requires urgent and coordinated action, the report said, calling for renewed political interest in fighting corruption, increased transparency in extractive sector transactions and a crackdown on banks that aid fraudulent transfers.

African and non-African governments and the private sector – including oil, mining, banking, legal and accountancy firms – were all involved in schemes designed to launder money and avoid paying corporate tax, according to the study.

More than $1tn was siphoned off globally through illegal schemes between 2007 and 2009, the report said, noting that lost African revenues comprised 6% of that total. But the authors cautioned that poor data and complicated laundering networks could make the amount much higher.

“Illicit financial flows from Africa range from at least $30bn to $60bn a year,” the report said. “These lower-end figures indicated to us that in reality Africa is a net creditor to the world rather than a net debtor, as is often assumed.”

But efforts to stop funds reaching terrorist groups, such as Nigeria’s Boko Haram and Somalia’s al-Shabaab, have led to improved anti-money laundering institutions in many African countries, the report said. This includes passing legislation designed to stop illicit flows, creating financial intelligence units and monitoring banking activities.

The report called for the UN to crack down on European and US firms that engage in tax avoidance and money laundering.

Joseph Stead, senior economic justice adviser at Christian Aid, said: “This is the first time that African countries have spoken out so strongly and in unison about how these financial crimes are hurting their people. That is a big deal.

“From now on, it will be much harder for the Organisation for Economic Co-operation and Development and other rich country groupings to argue that tax dodging, corruption, money laundering and so on are not a top priority for African governments.”

Governments that “turn a blind eye” to illicit outflows are forcing their poorest citizens to forgo hospitals, schools and environmental protection, said Sipho Mthathi, Oxfam’s executive director for South Africa.

“Oxfam estimates that Africa alone is losing almost half of the global $100bn of annual illicit financial flows,” she said.

The bulk of Africa’s illicit transfers originated from west Africa, where 38% of all funds leaving the continent were generated. Profit-making activities in north Africa accounted for 28% of the flows, while southern Africa, central Africa and eastern Africa each made up about 10%, the report showed.

Global Financial Integrity president Raymond Baker said the report represented a historic moment in the effort to fight Africa’s “most pernicious economic problem”. “This is a turning point in the movement to curtail illicit financial flows and promote financial transparency, both within Africa and globally,” he said.

The high level panel was founded by the AU and Uneca in 2012.

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Debate over monetary system grows

Nearly all money is created by commercial banks in the act of lending. They also decide whom to lend it to, and for what purposes. Is this good for the economy? A growing movement is arguing for an alternative.

Deutsche Welle, 28 Nov 2014

Where does money come from? Printing it yourself, unsurprisingly, is illegal. But in today's digital society, creating money has less and less to do with the printing of notes or minting of coins.

"If you ask people where money comes from, most of them will say it's made by the government," says Ben Dyson, founder of the UK organization Positive Money, part of a growing international movement pushing for reform to the current monetary system."But the reality is that the government is only responsible for creating three percent of the money that we use, and that three percent is the cash: the coins and the paper money."

In fact, money is created when commercial banks issue credit, or "make loans". Banks don't take money from someone else's account when they make a new loan. Rather, they enter the amount of the loan simultaneously as a debt and a credit, in equal amount, on either side of a double-entry bookkeeping ledger.

“When a bank makes a loan ... it credits the borrower's bank account with a bank deposit ... At that moment, new money is created," explains the Bank of England in its 2014 introduction to money in the modern economy.

That is how new money - and debt - enter the financial system. Conversely, when a borrower pays back a bank loan, the entries on both sides of the ledger are cancelled - both the "money" (credit record) and the corresponding debt are destroyed.

Cash is actually just a physical token
that people can obtain for money that
 originally arose as an electronic credit
record in the banking system, when a loan
was approved

So if everyone in the Eurozone paid back the principal of all their bank debts tomorrow, at the end of the day, there would be no debt, but neither would there be any money left anywhere in the system. The modern monetary system, in fact, is a scorekeeping system composed of precisely equal amounts of bank credit and bank debt.

Transferable IOUs administered by the banking system

What we think of "money" is really nothing other than transferable IOUs created and administered by the banking system, and supported by contract law.

The banking system's job is twofold: First, to keep track of exactly how much is owed to whom - by debtors to banks, and by banks to creditors.

And second, to decide on the allocation of new loans - to whom, and for what purposes. That's a powerful role - and a growing international movement is pushing for a wide social and political debate over the role of banks in making such decisions.

Creating electronic money

In the UK, 97 percent of the money that exists, Dyson says, is electronic money – money which exists only in computer banking systems and not in physical form. This is created not by the state, but by commercial banks.

In Germany, where many businesses do not accept card payments, around 85 percent of money is electronic and created by commercial banks, and 15 percent is cash, according to a German branch of the monetary reform movement called the Monetative.

While governments create money as coins and notes, commercial or high street banks create money as debt.

Financial instability, social disadvantage

"What this means for the economy is that because it is the banks that are creating the money and deciding who to lend it to, they get to choose where that money goes, for what purposes," Dyson told DW. The monetary reform movement argues that this is not only undemocratic, but damaging to the economy too.

According to Positive Money's research, in the ten years leading up to the financial crisis, around half of the money created by commercial banks was going directly into mortgage lending - loans to enable people to buy houses or commercial property - and around a third into the financial market, in order to buy existing financial assets, not to make new investments in things like factories.

"All that mortgage lending had the effect of pushing up house prices, and created a lot of instability in the market," Dyson says. Unaffordable housing has been a particular problem for the UK during the past couple of decades, as mortgage over-lending has relentlessly inflated a bubble in the price of housing.

If and when that bubble pops, many people will be left with housing debt in excess of the current market value of the house they borrowed so much money to buy. Precisely that problem - the bursting of a huge bubble in real estate prices - is what led to the economic depression in Spain after 2008. Instead of spending money on consumer goods or investment, Spaniards have been trying to pay down excessive debt accumulated pre-2008 during a decade-long era of real estate speculation.

Post-crisis public spending austerity has hit
 the UK hard - yet critics say it could be
 ended tomorrow with fresh central bank
money

Growing debate

Dyson and his counterparts around the world – the International Association for Monetary Reform lists initiatives in 20 countries – are not alone in believing in the need for change. The debate is also taking off among economists and politicians, particularly in the UK, where last week a backbench parliamentary debate took place to discuss the issue took place.

Martin Wolf, the chief economics commentator at the Financial Times, has written several recent columns in favor of stripping the banks of their monopoly on the power to create money.

Lord Adair Turner, former head of the UK's Financial Services Authority, recently wrote a Financial Times opinion article calling on the UK government to direct the Bank of England to create debt-free money to fund the government deficit.

The government could spend a carefully calibrated amount of new, debt-free money into circulation to stimulate demand - for example, by using it to build new low-carbon energy infrastructure or improved rail systems. The new infusion of cash in workers' pockets would circulate, and as it got into the hands of debtors, it would them a source of fresh funds with which to pay down excessive previously accumulated debt, Turner and others have argued.

Mervyn King, who headed the Bank of England for ten years until 2013, has also called for reform of the monetary system, saying that "of all the many ways of organizing banking, the worst is the one we have today."

Calls for monetary reform from such prominent figures remains "barely imaginable" in Germany, says Klaus Karwat of the Monetative. "The banking sector plays a much greater role in the UK economy than it does here, so the need for debate is much more pressing there," he told DW.

The movement's focus is raising awareness of how the current system of money creation works: surveys conducted by Positive Money and Monetative showed that many MPs in both countries lacked a general understanding of the monetary system.

Returning the power to create money to the state

"What we're saying is that commercial banks shouldn't have the ability to create electronic money, the deposits in your account, because they have incentives to lend recklessly. The more they lend, the more interest they can charge. So they over-lend, especially in housing, and create bubbles - debt bubbles and housing price bubbles.

Lloyds TSB was one of the UK banks
to receive a government bailout in 2007

Dyson and his colleagues propose that the power to create money should be returned to the central bank, which is owned by the government, working closely with the Treasury. The state would then control the creation of electronic money as well as notes and coins.

"But the government monetary authority's job will be to create what the economy needs, looking at the economy as a whole and on a long term basis, whereas the banks are currently looking at the very short term, and only at their opportunity to profit rather than the wider needs of the economy," Dyson said.

"We don't need banks nearly as much as we think we do," added Dyson. "And if we take the power to create money away from them, we'll need them even less, because we'll have a source of money created by public central banks which will come into the economy without debt - without anybody having to borrow it."

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Global Firms’ Tax Avoidance Schemes Revealed in Leaked Documents

Jakarta Globe –AFP, Nov 06, 2014

Cases of Pepsi are displayed for sale in Carlsbad, California in this file photo
taken February 7, 2012. (Reuters Photo/Mike Blake)

Washington. Hundreds of the world’s biggest companies have brokered secret deals with Luxembourg to avoid paying billions of dollars in taxes according to a trove of leaked documents published by an investigative journalism group on Wednesday.

The US-based International Consortium of Investigative Journalists (ICIJ) said a six-month investigation had found household firms such as Pepsi, IKEA and Deutsche Bank were among companies which had taken advantage of legal tax avoidance schemes with Luxembourg.

The ICIJ said it had reviewed around 28,000 pages of leaked documents which detailed complex financial structures that enabled companies to dramatically slash their tax liabilities.

The organization said hundreds of billions of dollars had been funneled through Luxembourg as part of the agreements, wiping billions of dollars in taxes from the companies’ bottom lines.

Global accounting giant PricewaterhouseCoopers had helped the companies in question secure at least 548 tax rulings in Luxembourg between 2002 and 2010 according to an ICIJ analysis of the documents.

The documents uncovered details of Advance Tax Agreements – deals which set out how companies will be taxed.

“It’s like taking your tax plan to the government and getting it blessed ahead of time,” the ICIJ quoted Connecticut School of Law tax expert Richard Pomp as saying.

“And most are blessed. Luxembourg has a very user-friendly tax department.”

The ICIJ said its investigation had involved a team of more than 80 journalists from 26 countries working for outlets including The Guardian, Le Monde and Germany’s Suddeutsche Zeitung.

‘Magical fairyland’

The Guardian said in its report of the investigation that the arrangements forged between the companies and the tiny EU member state were “perfectly legal.”

But it said the agreements were enabling tax avoidance on “an industrial scale.”

Other companies that benefited from the schemes included Burberry, Procter & Gamble, Heinz, JP Morgan and FedEx.

The ICIJ said some companies had been able to achieve effective tax rates of less than one percent on profits channeled through Luxembourg.

It said many cases involved Luxembourg subsidiaries of the companies in question, even if they maintained only a marginal business presence in the country. It said 1,600 companies were registered at one address alone.

The Guardian quoted US Treasury tax expert Stephen Shay as saying Luxembourg was akin to a “magical fairyland.”

“Clearly the database is evidencing a pervasive enabling by Luxembourg of multinationals’ avoidance of taxes [around the world],” said Shay, a Harvard Law School professor who gave expert testimony during a US Senate investigation last year into Apple’s tax avoidance structures.

The revelations come against a backdrop of mounting scrutiny by authorities worldwide of tax arrangements involving major firms.

Last month, the EU snagged Internet titan Amazon in a widening probe into sweetheart tax deals for major multinationals, saying they were unfair to competitors and taxpayers.

The move follows similar probes announced in September into US tech icon Apple in Ireland, coffee-shop chain Starbucks in the Netherlands, and the financial arm of Italian automaker Fiat, also in Luxembourg like Amazon.

European Union anti-trust regulators will examine if Amazon’s tax arrangements with Luxembourg amount to illegal state aid, giving the company an unfair advantage.

Agence-France Presse

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Offshore Secrets

Gary Barlow apologises over tax affairs

Swiss complete tax-dodge payments to Britain, Austria

UK tax inspectors collect record £23.9bn

France nets 1.8 billion euros in anti-tax-fraud drive

Amnesty for foreign bank accounts nets €450m for the treasury

Hoeness alleged tax liability soars to 23.7 million euros

German feminist Alice Schwarzer admits to Swiss account, then goes on offensive

Illicit savers admit to stashing away €552m, minister says

Hundreds confess to tax office about secret foreign savings accounts

US slaps Credit Suisse with $2.6 billion fine for aiding tax evaders

Swiss company agrees to pay $4.4m fine for helping US tax dodgers

Commentary: OECD tax agreement - a little more justice

Ireland to close ‘double Irish’ tax loophole

G20 countries agree to exchange tax information to stamp out evasion

OECD proposes curbs to corporate tax avoidance

US to add Taiwan to list of states complying with new tax evasion act June

Singapore and US reach tax evasion deal

Switzerland, Singapore join clampdown on bank secrecy

Offshore tax evaders targeted with new ad campaign of warnings

New asset declaration rules linked to China's anti-graft efforts

The Netherlands and US agree tax information exchange

Cayman Islands and Costa Rica agree to share bank account details with US Liechtenstein ends banking secrecy, accepts OECD tax rules

G20 to share tax information by 2015

China joins anti-tax evasion convention

Dutch polish tax image, to 'update' treaties with 23 poor countries

G20 backs plan to stop global tax avoidance and evasion

G8 leaders agree tax evasion measures

Indonesia Welcomes Tax Haven Transparency

British PM strikes 'tax havens' deal ahead of G8

Andorra to introduce income tax for first time

Swiss strike bank deal with US over tax evasion

Singapore Boosts Measures Against Global Tax Cheats

Bermuda and UK territories sign anti-tax evasion deal

Austria to loosen bank secrecy laws within weeks

Luxembourg to ease the secrecy surrounding its banks

Australia to force multinationals to disclose tax arrangements

HMRC in offshore tax evasion crackdown after receiving fresh data

G20 urges global community to end banking secrecy

Major EU countries to tackle tax havens

France's President Hollande: Eradicate tax havens

Dutch MPs call for action on tax havens, plan should be ready by summer

EU deal to tackle mining corruption

French ministers to declare assets publicly

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China Offshore Secrets

New US taxact will help China anti-graft campaign

Asian logging companies 'use British islands for tax dodging'

Wealthy in China need new tax haven as Switzerland U-turns on banking privacy

Offshore tax-dodging piece shows anti-Chinese bias: report

Chinese oil giants make use of offshore shell companies in Caribbean

China's cash haven in the British Virgin islands – the key points

China's princelings storing riches in Caribbean offshore haven

EU Offshore Secrets

Luxembourg tax files: how tiny state rubber-stamped tax avoidance on an industrial scale - New

Offshore tax dealings: celebrities and sportsmen in leaked Jersey files

EU launches investigation into Apple, Starbucks and Fiat tax deals

Swiss bank accused of helping clients evade US taxes

Gibraltar tries to lure London hedge fund bosses with promise of low taxes

Dutch savers have €1.1bn in Luxemburg and Austria: tax office

Dutch finance ministry denies Starbucks tax secrecy claims

100 of UK's richest people concealing billions in offshore tax havens

The 'who's who' of European tax havens

Accountancy firms 'use knowledge of Treasury to help rich avoid tax' – MPs

The nation at the heart of the offshore scandal: Britain

Leaks reveal secrets of the rich who hide cash offshore