2014-46 ABC

This is NOT A LESSON; this is Accountants Behaving (almost) Criminally.

Someone stole a hard drive containing agreements between the government of Luxembourg  and various companies that allowed them to use accounting tricks to reduce taxes.

Here is an example, from the International Consortium of Investigative Journalists who received and published the documents.

The leaked documents reviewed by ICIJ involve deals negotiated by PricewaterhouseCoopers, one of the world’s largest accounting firms, on behalf of hundreds of corporate clients. To qualify the companies for tax relief, the records show, PwC tax advisers helped come up with financial strategies that feature loans among sister companies and other moves designed to shift profits from one part of a corporation to another to reduce or eliminate taxable income. 

The records show, for example, that Memphis-based FedEx Corp. set up two Luxembourg affiliates to shuffle earnings from its Mexican, French and Brazilian operations to FedEx affiliates in Hong Kong. Profits moved from Mexico to Luxembourg largely as tax-free dividends. Luxembourg agreed to tax only one quarter of 1 percent of FedEx’s non-dividend income flowing through this arrangement – leaving the remaining 99.75 percent tax-free.

Interestingly enough,another organization that benefited from tax avoidance is the Public Sector Pension Investment Board (PSPIB), a Crown corporation which invests pensions of federal public servants (including RCMP!).

CBC writes about it extensively. This is the only Canadian publication shows up when I search for the story (google Public Sector Pension Investment Board International Consortium of Investigative Journalists). The story is embarrassing (I wonder if the PSPIB manages pensions of our elected representatives); the silence is odd.