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How and why Disney and other corporations hide billions in Luxembourg to avoid excessive taxes


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(NaturalNews) Corporations are under assault in the court of public opinion in the United States, brought on, in large part, by politicians who seek to use class warfare as a means to maintain their own power and influence.

But that said, some of the activities undertaken by many American multinational corporations makes them ripe for criticism and even condemnation -- criticism that can be amplified unnecessarily when the full breadth of the story is not reported in the media.

Indicative of this phenomenon is a recent report by the International Consortium of Investigative Journalists (ICIJ). In a Dec. 9 report, the organization notes:

A new leak of confidential documents expands the list of big companies seeking secret tax deals in Luxembourg, exposing tax-saving maneuvers by American entertainment icon The Walt Disney Co., politically controversial Koch Industries Inc. and 33 other companies.

Legal tax haven - and hundreds of corporations use it

The ICIJ team went on to note that Disney and Koch Industries, the latter a U.S.-based energy and petrochemical enterprise, established a web of interlocking corporations in the small Western European nation as a means of possibly lowering the amount of taxes they owed in both the United States and Europe. As noted by CNN Money, "Hundreds of companies have saved billions of dollars in tax thanks to deals" with Luxembourg.

Disney and Koch, then, are also making use of the tax shelter, which is legal, even though it helps the companies salvage perhaps billions per year in profits that otherwise would have gone to governments (including the U.S. government).

"Widespread corporate use of tax maneuvers akin to these, in tax shelters the world over, are estimated to cost the U.S. treasury billions annually," the ICIJ reported. "They increase profits and benefit shareholders at the expense of the companies' home countries and other places where they do significant business."

The investigative reporting organization said it had obtained tax documents on Disney and Koch Enterprises as part of a gaggle of data outlining detailed and complex financial machinations involving scores of subsidiaries in Luxembourg. Earlier, the ICIJ published another set of leaked documents involving tax deals in Luxembourg involving other companies like FedEx, Pepsi, IKEA and some 340 other corporations around the world.

"Other companies appearing in the newest leaked files include Hong Kong-based conglomerate Hutchison Whampoa, private equity firm Warburg Pincus, and Internet phone giant Skype," the report said. "One of the Skype files relates to a restructuring in which Internet mega-marketer eBay sold a controlling stake in Skype to private investors. Skype, based in Luxembourg, is now a division of Microsoft."

"Microsoft adheres carefully to the laws and regulations of every country in which we operate," the company said in a statement emailed to ICIJ.

Other corporations declined to comment, including Ernst & Young, KPMG, PwC and Deloitte -- none of which would answer detailed questions regarding their tax deals in Luxembourg.

High corporate tax rates in U.S. driving the rush to tax havens

"When the money arrives in Luxembourg, taking advantage of an agreement between countries that assumes it will be taxed in Luxembourg, it goes in one of these unusual structures... and it's not taxed very much at all," Richard Brooks, a former tax inspector in the UK and author of The Great Tax Robbery, said about such arrangements, though ICIJ reported that he was not talking about any specific company or corporation.

"Americans are sick and tired of big corporations arranging sweetheart deals with tax havens to dodge their U.S. tax obligations," U.S. Senator Carl Levin, D-Mich., who has led investigations and held hearings into corporate tax avoidance, including by Apple and Caterpillar, told ICIJ. "It is unfair and unaffordable to let another year pass without eliminating the unjustified corporate tax giveaways that force everyone else to pick up the tab for government services."

Levin, President Obama and other Democrats have heavily criticized such tax deals, but without really addressing a key underlying issue -- corporate tax rates in the United States, which are the highest in the developed world at about 35 percent.

The ICIJ report, like other media reports, have gone to great lengths to identify corporations using havens like Luxembourg - -which, again, are legal -- without addressing the issue of high taxation that drives them to such havens in the first place.

Sources:

http://www.icij.org

http://money.cnn.com

http://www.theweek.co.uk

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