Leak shows scale of Luxembourg’s sweet tax deals

Updated 10 November 2014
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Leak shows scale of Luxembourg’s sweet tax deals

BRUSSELS: Luxembourg, one of the world’s wealthiest nations, came under fire Thursday after leaked documents allegedly revealed the extent to which it has attracted multinationals and the super-rich with sweet tax deals, depriving other countries of valuable tax revenue.
The government defended itself saying it had done nothing illegal in its deals with corporations like Pepsi and IKEA. But other European nations, including neighbor France, criticized the tiny country’s tax practices — particularly when they have to impose austerity cuts on their citizens to make ends meet.
“Tax ‘optimization’ — companies that legally find solutions to pay little or no taxes — that is no longer acceptable for any country,” said French Finance Minister Michel Sapin. “I wish that in a few years we never have to talk about something like this again.”
Luxembourg’s other neighbors, Belgium and Germany, and the Netherlands were equally quick to condemn the practice, which gained center stage on Thursday when a group of investigative reporters produced documents allegedly showing that scores of major multinational companies have won such advantageous deals.
The practice can include offering low corporate tax rates to companies that have their European Union headquarters in Luxembourg, a nation of 520,000 that otherwise doesn’t have a big economy.
But Luxembourg is not alone in being aggressively competitive in attracting companies. Ireland and the Netherlands itself are being investigated by the European Union executive for their tax practices. The issue has come to the fore since the financial crisis saw governments scrounge for money to refill their coffers — and tolerance for such practices waned.
Luxembourg Finance Minister Pierre Gramegna insisted his country had not broken any law. “What has happened here is totally legal,” he said.
He said Luxembourg would cooperate with others to make sure tax standards are better coordinated on a global level as soon as possible. “The moment the rules change globally, it is evident that Luxembourg will apply them quickly,” Gramegna said.
The International Consortium of Investigative Journalists said the practice in Luxembourg was widespread after it pored through some 28,000 pages of confidential documents covering some 340 businesses that could be linked to the Grand Duchy for special tax deals.
European Parliament President Martin Schulz said that what was most worrying was that nations could simply come out and say it was all perfectly legal.
“This reality means that we need to urge the (EU) member states to work with us to end systematic tax evasion practices in Europe, be it in Luxemburg or any other country,” he said.
The EU has already broadened its crackdown on multinationals’ tax avoidance schemes, with a probe against Amazon’s practices launched last month. The ICIJ allegations now add many more high-profile names, including FedEx, Pepsi and IKEA.
The European Commission said that it was specifically targeting any deal that would sidestep market conditions and give an unfair edge to one company over others.
At a time of stringent austerity cuts, the tax advantages for multinationals and the wealthy are seen as evidence of an unfair society punishing the poor and rewarding the rich.
At a protest march of 100,000 workers against further austerity in Brussels, the issue of Luxembourg’s tax deals was raised time and again.
Socialist trade union leader Rudy De Leeuw said it amounted to “stealing from the common man while at the same time capitalists take their money to Luxembourg. This is unacceptable.”
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Raf Casert can be followed on Twitter at http://www.twitter.com/rcasert


BMW picks insider Zipse as CEO to catch up with rivals

Oliver Zipse
Updated 19 July 2019
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BMW picks insider Zipse as CEO to catch up with rivals

  • German giant has lost ground to Mercedes-Benz and Tesla as tech steps up

FRANKFURT: BMW has named Oliver Zipse as its new CEO, continuing the German carmaker’s tradition of promoting production chiefs to the top job even as the auto industry expands into new areas such as technology and services.
Hailing Zipse’s “decisive” leadership style, BMW hopes the 55-year-old can help it win back its edge in electric cars and the premium market  from rival Mercedes-Benz.
But some analysts questioned whether Zipse was the right choice with new fields such as software and services like car-sharing becoming increasingly important.
“What is intriguing is the cultural bias to appoint the head of production. It works sometimes but ... being good at building cars is not a defining edge the way it was 20 years ago,” said Jefferies analyst Philippe Houchois.
Current CEO Harald Krueger, and former chiefs Norbert Reithofer, Bernd Pischetsrieder and Joachim Milberg were all former production heads.
Zipse joined BMW as a trainee in 1991 and served as head of brand and product strategies and boss of BMW’s Oxford plant in England before joining the board.
He will become chief executive on Aug. 16, taking over from Krueger who said he would not be available for a second term.
“With Oliver Zipse, a decisive strategic and analytical leader will assume the Chair of the Board of Management of BMW. He will provide fresh momentum in shaping  the future,” said Reithofer.
Zipse helped expand BMW’s efficient production network in Hungary, China and the US, in a move that delivered industry-leading profit margins.
Under Krueger, BMW was overtaken in 2016 by Mercedes-Benz as the best-selling luxury car brand.
It also had an early lead over US  rival Tesla in electric cars, but scaled back ambitions after its i3 model failed to sell large numbers.
Reithofer initially championed Krueger’s low-key consensus-seeking leadership, but pressured him to roll out electric vehicles more aggressively, forcing Krueger to skip the Paris Motor Show in 2016 to reevaluate BMW’s electric strategy.
Krueger’s reluctance to push low-margin electric vehicles led to an exodus of talented electric vehicle experts, including Christian Senger, now Volkswagen’s (VW) board member responsible for software, and Audi’s Markus Duesmann, who is seen as a future CEO of the company.
Both were poached by VW CEO Herbert Diess, a former BMW board member responsible for research who was himself passed over for BMW’s top job in 2015.
VW has since pushed a radical 80 billion euro ($90 billion) electric car mass production strategy, and a sweeping alliance with Ford.

Other skills
“A CEO needs to have an idea for how mobility will evolve in the future. This goes far beyond optimising an existing business,” said Carsten Breitfeld, chief executive of China-based ICONIQ motors, and former BMW engineer. “He needs to build teams, attract talent, and promote a culture oriented along consumer electronics and internet dynamics.”
German manufacturers have dominated the high-performance market for decades, but analysts warn shifts towards sophisticated technology and software is opening the door to new challengers.
“Tesla has a lead of three to four years in areas like software and electronics. There is a risk that the Germans can’t catch up,” UBS analyst Patrick Hummel said.
Germany’s Auto Motor und Sport car magazine, normally quick to champion German manufacturers, this week ran a cover questioning BMW’s future.
“Production expertise is important, but if you want to avoid ending up being a hardware provider for Google or Apple, you need to have the ability to move up the food chain into data and software,” a former BMW board member said.