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


Gulf defense spending ‘to top $110bn by 2023’

Updated 15 February 2019
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Gulf defense spending ‘to top $110bn by 2023’

  • Saudi Arabia and UAE initiatives ‘driving forward industrial defense capabilities’
  • Budgets are increasing as countries pursue modernization of equipment and expansion of their current capabilities

LONDON: Defense spending by Gulf Arab states is expected to rise to more than $110 billion by 2023, driven partly by localized military initiatives by Saudi Arabia and the UAE, a report has found.

Budgets are increasing as countries pursue the modernization of equipment and expansion of their current capabilities, according to a report by analytics firm Jane’s by IHS Markit.

Military expenditure in the Gulf will increase from $82.33 billion in 2013 to an estimated $103.01 billion in 2019, and is forecast to continue trending upward to $110.86 billion in 2023.

“Falling energy revenues between 2014 and 2016 led to some major procurement projects being delayed as governments reigned in budget deficits,” said Charles Forrester, senior defense industry analyst at Jane’s.

“However, defense was generally protected from the worst of the spending cuts due to regional security concerns and budgets are now growing again.”

Major deals in the region have included Eurofighter Typhoon purchases by countries including Saudi Arabia and Kuwait.

Saudi Arabia is also looking to “localize” 50 percent of total government military spending in the Kingdom by 2030, and in 2017 announced the launch of the state-owned military industrial company Saudi Arabia Military Industries.

Forrester said such moves will boost the ability for Gulf countries to start exporting, rather than purely importing defense equipment.

“Within the defense sector, the establishment of Saudi Arabia Military Industries (SAMI) in 2017 and consolidation of the UAE’s defense industrial base through the creation of Emirates Defense Industries Company (EDIC) in 2014 have helped consolidate and drive forward industrial defense capabilities,” he said.

“This has happened as the countries focus on improving the quality of the defense technological work packages they undertake through offset, as well as increasing their ability to begin exporting defense equipment.”

Regional countries are also considering the use of “disruptive technologies” such as artificial intelligence in defense, Forrester said.

Meanwhile, it emerged on Friday that worldwide outlays on weapons and defense rose 1.8 percent to more than $1.67 trillion in 2018.

The US was responsible for almost half that increase, according to “The Military Balance” report released at the Munich Security Conference and quoted by Reuters.

Western powers were concerned about Russia’s upgrades of air bases and air defense systems in Crimea, the report said, but added that “China perhaps represents even more of a challenge, as it introduces yet more advanced military systems and is engaged in a strategy to improve its forces’ ability to operate at distance from the homeland.”