December 9, 2014 / 9:11 PM / 5 years ago

New Luxembourg leaks reveal Disney, Koch Industries tax deals

LONDON (Reuters) - Tax deals that entertainment giant Walt Disney Co., commodities group Koch Industries and others agreed with the Luxembourg authorities were revealed on Tuesday by the International Consortium of Investigative Journalists (ICIJ).

The signage at the main gate of The Walt Disney Co. is pictured in Burbank, California, May 7, 2012. REUTERS/Fred Prouser

The ICIJ said the two companies engaged in complex restructurings, and channeled hundreds of millions of dollars in profits between 2009 and 2013 through Luxembourg subsidiaries that enjoyed tax rates of less than 1 percent.

The revelations follow earlier ICIJ releases which prompted an EU parliament no-confidence vote on the European Commission’s new president, Jean-Claude Juncker. Juncker, who had overseen the Grand Duchy’s tax policies for two decades as finance minister and later prime minister, survived the vote.

A spokesman for Luxembourg’s finance ministry declined comment on the latest disclosures citing leaked documents.

“Koch companies conduct their business lawfully, and they pay taxes in accordance with applicable laws,” Koch spokesman Robert Tappan said in an emailed statement.

Disney was not immediately available for comment.

Disney established an inter-company bank in Luxembourg which then extended high interest loans to operating affiliates in countries like France, thus reducing their taxable income, the ICIJ said.

Advisory group Ernst and Young (EY) advised Disney and Koch on their arrangements, the consortium said. Other companies whose tax deals appear in the latest leaks include Hong Kong-based conglomerate Hutchison Whampoa, private equity group Warburg Pincus, and Microsoft subsidiary Skype.

Microsoft said it followed the law in all the countries where it operated. Warbug Pincus declined to comment.

Hutchison and EY were not immediately available for comment.

The ICIJ’s first set of Luxembourg tax deal revelations, published on Nov. 5, were based on files from accounting group PricewaterhouseCoopers (PwC).

That prompted a UK parliamentary panel on Monday to accuse PwC of organizing tax avoidance on an “industrial scale”.

In addition to EY, the latest set of documents include files from the other two of the “Big 4” accounting firms: Deloitte and KPMG. KPMG said its code of conduct required employees to act lawfully and ethically. Deloitte was not immediately available for comment.

Tax avoidance is legal but companies which use complex structures to reduce their tax bills are coming under increasing scrutiny from the public, and legislators internationally, who have promised to crack down on the practices.

The EC was already investigating the legality of tax deals similar to those revealed by the ICIJ, that countries including Luxembourg, the Netherlands and Ireland agreed with multinationals in recent decades.

The Nov ICIJ leaks boosted calls for greater harmonization of European tax laws.

Additional reporting by Alastair Macdonald in Brussels, Bill Rigby in Seattle and Lewis Krauskopf and Gregory Roumeliotis in New York.; editing by Susan Thomas and Christian Plumb

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