Multinationals and wealthy families implicated in Luxembourg tax deals

State-owned telecommunications utility Proximus has denied any wrongdoing in connection with the use of secret deals made in Luxembourg to avoid paying Belgian corporation tax. The denial comes after the revelation by the International Consortium of Investigative Journalists that multinationals were avoiding tax in their home countries by using Luxembourg to report income.

The consortium is composed of journalists from various countries who work together on large and complex cases. They were previously responsible for the dossier known as Offshore Leaks, and the latest scandal has been christened “LuxLeaks”.

The Belgian journalists who took part in the six-month investigation are Lars Bové of De Tijd, Kristof Clerix of MO* magazine and Xavier Counasse of Le Soir.

Among the other names implicated in the scandal are Ikea, Amazon, Guardian Media Group, BNP Paribas, Volkswagen, Heinz and Apple. There are 26 Belgian companies named in the 28,000 pages of evidence concerning 548 agreements, as well as a number of wealthy families.

The construction enables multinationals – any business operating in more than one country – to route a large part of their income through Luxembourg and tax havens like Gibraltar and the British Virgin Islands, in return for which they can benefit from a minimal tax rate. As a result, the Belgian exchequer is estimated to have missed billions in tax revenues.

“You can’t hold it against us that we offer telecom services in Luxembourg,” Jan Margot, spokesperson for Proximus, previously known as Belgacom, told VTM News. “We have a wholly owned subsidiary which is active there. If Proximus in that way pays a little less tax but also makes more profit, then the Belgian state is also the winner.”

“We condemn these fiscal practices as unacceptable,” prime minister Charles Michel told the federal parliament. Michel was in Luxembourg on Wednesday for talks with his counterpart, Xavier Bettel, about financial transparency and exchange of fiscal information.

Bettel held a press conference to stress that the Grand Duchy’s tax regime was “in line with international laws”.  His finance minister, Pierre Gramegna, also defended the system. “This is not a Luxembourg speciality. Various other European countries do the same,” he said.

“This cannot be allowed; we are not going to just let this go by,” Belgium’s finance minister, Johan Van Overveldt told VRT radio. “This is exactly the sort of financial malpractice that we intended to avoid with the introduction of the Cayman Tax.”

The Cayman Tax allows the government to inspect information on trusts and other fiscal constructions and, if appropriate, impose a tax on them. The law, Van Overveldt said, is “specifically intended to catch up with methods of evasion that allow large companies to escape paying tax”. The government would introduce the law “as quickly as possible,” he said.

The parliamentary committee on finance will hold a series of hearings on 26 November about the matter.

Photo: Proximus CEO Dominique Leroy at the launch of the new Proximus brand

©courtesy Belgacom Group