Leak shows scale of Luxembourg’s sweet tax deals

Updated 10 November 2014
0

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.”
___
Raf Casert can be followed on Twitter at http://www.twitter.com/rcasert


China’s Xiaomi swings to net profit in Q3 on robust sales in India, Europe

Updated 9 min 5 sec ago
0

China’s Xiaomi swings to net profit in Q3 on robust sales in India, Europe

  • Profit for the three months through September reached $357.23 million
  • The firm has been adding new brands to its smartphone portfolio to target niche consumers

HONG KONG: Chinese smartphone maker Xiaomi Inc. said on Monday it swung to a net profit in the third quarter, beating analyst estimates, driven by robust sales in India and Europe.
Profit for the three months through September reached 2.48 billion yuan ($357.23 million), versus an 11 billion yuan loss in the same period a year earlier. That compared with a 1.92 billion yuan average of five analyst estimates compiled by Refinitiv Eikon.
Xiaomi also said operating profit sank 38.4 percent to 3.59 billion yuan in the third quarter. Revenue rose 49.1 percent to 50.85 billion yuan.
The mixed results come amid a slowdown in smartphone purchases both in China, where Xiaomi once was the top-selling handset brand, and overseas.
Nevertheless Xiaomi, along with fellow low-cost handset makers Oppo and Vivo, accounted for around a quarter of the global smartphone market in the first half of 2018, showed data from researcher IDC.
Xiaomi’s fastest-growing markets are India, where it has had success with its budget Redmi phone series, and Europe, where it entered in 2017 with launches in Russia and Spain. Earlier this month it released its flagship Mi 8 Pro device in Britain.
But to weather the global market slowdown, analysts said Xiaomi needs to expand to new markets and also sell more higher-priced devices with wider profit margins.
The firm has been adding new brands to its smartphone portfolio to target niche consumers. Concurrent with today’s earnings, it announced a partnership with Meitu Inc, a maker of a photo app popular with young women, to sell phones under its brand. Earlier this year it launched Black Shark, a phone targeted at gamers, and Poco, a value-for-money device aimed at India.
Mo Jia, who tracks China’s smartphone makers at research firm Canalys, said attempts to sell more expensive devices requires changing its brand perception.
“It’s still very hard for Xiaomi to change its perception of being a low-end device manufacturer as the majority of its smartphone shipments are the Redmi series.”
Xiaomi also aims to transform itself from a smartphone firm into a software company. As the firm prepared for its IPO, founder Lei Jun touted Internet services — namely advertisements placed on the firm’s in-house apps — as its future and key differentiator from other handset brands.
In the third quarter, Xiaomi’s smartphone division grew revenue by 36.1 percent while its Internet service division grew 85.5 percent. But phones made up 64.6 percent of total sales, while Internet services made up 9.3 percent.
The results are the second set released by Xiaomi since the smartphone maker raised $4.72 billion in an initial public offering (IPO) in June, valuing the firm at about $54 billion — around half of some earlier industry estimates of $100 billion.
Its shares have fallen roughly 20 percent since they started trading in July amid a broader Chinese stock market sell-off and concern about a slowdown in China’s tech industry.