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From: The Socialist issue 833, 12 November 2014: We can win 10 an hour

Search site for keywords: Tax - Luxembourg - Taxes - Government - PCS

'A magical fairyland' of corporate tax avoiders

Alison Hill

More shocking revelations about tax avoidance by giant corporations have just been revealed by a team of journalists and published in the Guardian.

A set of leaked documents refer to arrangements made with the Luxembourg government. Broadly this involves the Grand Duchy rubber stamping labyrinthine 'loan' deals which effectively allow big companies to write off tax liabilities against interest they are paying to themselves. An arrangement not open to us on PAYE.

One tax expert, when giving evidence to a US Senate investigation in 2013, described Luxembourg as "a magical fairyland" - with entrance tickets restricted to big business of course.


Tory Prime Minister Cameron and Chancellor Osborne have made various pledges about 'getting tough' over tax avoidance. But in reality Osborne is actually involved in a race to the bottom to attract more tax avoiding companies.

In 2012 he changed the regulations, cutting taxes for finance companies established in Luxembourg. Welcome to 'UK Tax Haven Inc.'

Over 1,000 companies have been involved in these arrangements, including household goods manufacturer Dyson, who the Guardian describes as saving millions through being taxed by 1% in Luxembourg.

Companies which may once have been involved in actual engineering have turned to tax engineering, to benefit a small elite.

To quote one example, pharmaceutical company Shire has operations in Basingstoke and the US. Most of its market is in the US, producing drugs to treat ADHD, Crohn's disease, etc.

Its head office is in Ireland and it is registered in Jersey. Shire's CEO is Michael Spencer, Tory party treasurer 2006-2010. He has made around 5 million in donations to the party.

Shire used the wheeze of making loans to itself in Luxembourg. This was so successful that the documents leaked to the Guardian show that $1.87 billion in profits from one part of Shire was taxed at less than 1% over the last five years.

Under capitalism, no amount of legislative change is likely to stamp out this obscenity. In fact these revelations have just exposed the competition between countries to be the most attractive tax haven. Luxembourg is just one of the worst examples.

What more argument do we need to nationalise these companies and run them under democratic workers' control and management?

The Public and Commercial Services union (PCS) represents 50,000 workers in HMRC, responsible for collecting taxes in the UK. PCS estimates the UK tax gap to be 120 billion a year. This is 25 billion in tax avoidance, 70 billion in tax evasion and 25 billion in outstanding taxes.

Yet the government is cutting tax staff and closing tax offices. Staff have been cut by half since 2005 and another 10,000 are scheduled to go over the next three years.

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