Representatives from some of the world’s most renowned companies, including Disney, IKEA, Google and HSBC, faced a grilling from European parliamentarians on Monday, part of a probe into corporate tax policies initiated following the publication of ICIJ’s Luxembourg Leaks investigation.
Eleven of the thirteen multinational corporations invited to participate sent representatives to the final meeting of the European Parliament’s TAXE Committee.
The Brussels hearing was slated by Committee chair and Member of European Parliament Alain Lamassoure as a last chance for the companies to have their say, after many had declined previous invitations. The committee was established after ICIJ’s Luxembourg Leaks investigation revealed how secret agreements between Luxembourg authorities and some of the world’s biggest multinational corporations allowed more than 370 companies - including Disney, IKEA, Pepsi and Deutsche Bank - to avoid billions of euros in taxes on profits channeled through Luxembourg.
“The time has come to end this and to replace the law of the jungle. So when it comes to company taxation there will be a before and after LuxLeaks,” Lamassoure said in opening the committee hearing.
Questions from MEPs ranged from grilling companies over operations in known tax havens to quizzing their representatives about whether the companies would support transparency measures such as public country-by-country reporting of profits.
Answers varied, but most companies used the opportunity to reiterate that their corporate structures and tax activities complied with all relevant laws, and that they would continue to comply with tax laws and policies as they change in each jurisdiction.
Questioned over the specifics of their Luxembourg operations IKEA Group’s Krister Mattsson was defiant about the company’s structure.
“IKEA is not a company, it is a brand name,” he said. “We don’t have any subsidiaries in Luxembourg or Lichtenstein.”
The LuxLeaks documents revealed how the branch of IKEA that oversees franchise operations, called the Inter IKEA Group, used a combination of companies and foundations in Luxembourg, Switzerland and Liechtenstein to save on tax bills. The IKEA Group, represented by Mattsson at the TAXE Committee hearing, is responsible for most of the brand’s more than 360 stores, but does not control the franchise.
The Walt Disney Company’s representative John Stowell was pressed over revelations in the Luxembourg Leaks investigation that the company used a 34-step advanced tax agreement that allowed the renowned entertainment giant to move profits to the low-tax jurisdiction of Luxembourg.
However Stowell said that payments to Disney’s Luxembourg subsidiaries were tax-exempt dividends already taxed in countries where profits were made. He said Disney is supportive of any move that would provide greater clarity and certainty in global tax policies.
Quizzed on their operations in low tax jurisdictions, representatives from Facebook and Google both pointed out that their corporate structures complied with all relevant laws.
“We take our tax commitments very seriously and pay all our taxes, including in Europe,” Facebook’s Delphine Reyre said.
Google director of public policy and government relations Nicklas Lundblad said the money held by the company in Bermuda was related to its operations in the United States and did not minimize tax bills in the EU.
“The entire Bermuda structure doesn’t erase any tax liability, it defers only U.S. tax,” he said.
Representatives from Amazon and HSBC both apologized for not accepting earlier invitations to appear before the committee. Amazon said it couldn’t legally disclose details that were part of another EU investigation into the company’s tax practices, while HSBC blamed “short notice” for its absence at earlier hearings.
The TAXE Committee’s final report is due to be voted on at the next session of the European Parliament, however some MEPs have called for a six-month extension for the temporary committee to continue its investigation into tax rulings and policies across the EU.
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