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tax avoidance


Real Madrid soccer star Cristiano Ronaldo and Manchester United manager Jose Mourinho have been accused of tax avoidance, according to claims based on a huge document leak.

They allegedly avoided paying tax on millions of dollars of earnings by moving large sums to the British Virgin Islands.

The allegations are said to be based on two terrabytes of leaked information which include original contracts.

Both of them deny the claims.


Photo Getty Images

Photo Getty Images

Soccer agency Gestifute, which represents Cristiano Ronaldo and Jose Mourinho, said in a statement: “Both Cristiano Ronaldo and Jose Mourinho are fully compliant with their tax obligations with the Spanish and British tax authorities.

“Any insinuation or accusation made to Cristiano Ronaldo or Jose Mourinho over the commission of a tax offence will be reported to the legal authorities and prosecuted.”

The claims were published by an international consortium of journalists which obtained a trove of about 18 millions documents. Other top players were named in the documents.

The European Investigative Collaborations (EIC) consortium includes German newspaper Der Spiegel, Spain’s El Mundo and the UK’s Sunday Times. It says it intends to publish a series of articles under the banner “Football Leaks” over the next few weeks.

The leak comes eight months after the so-called Panama Papers lifted the lid on how the world’s rich and powerful use tax havens to hide their wealth.

One of the newspapers in the consortium, the Dutch NRC, alleges that Cristiano Ronaldo moved €63.5 million ($67.7 million) to the British Virgin Islands at the end of 2014.

The paper says Cristiano Ronaldo received sponsorship fees which were moved via two Irish companies to the tax haven, 11 days before Spain changed an advantageous tax law.

The NRC says the striker has so far not responded to questions asked by the consortium.

According to El Mundo, the leaked documents relate to the time that Jose Mourinho spent as manager of Real Madrid, between 2010 and 2013.

Real Madrid, Cristiano Ronaldo’s current employer, did not respond to requests from news agencies for comment.

Manchester United said the allegations related to events before Jose Mourinho’s arrival at the club and so it would not comment.

Jose Mourinho is reported to have moved €12 million ($13.2 million) into a Swiss account owned by a British Virgin Islands company, according to the EIC.

According to the reports, December 2 first batch of leaks centered on “a system” put in place by Jorge Mendes, whose company has denied any wrongdoing.

Jorge Mendes’ company, Gestifute, said in a statement that neither Cristiano Ronaldo nor Jose Mourinho “have been implicated in legal proceedings of the tax evasion commission in Spain”.

Gestifute noted it had taken legal redress against claims of tax evasion and stressed it had always acted with “the highest degree of professionalism in relations with [its] clients and authorities”.

It accused the media consortium of operating in an “insidious” way concerning the stars’ tax obligations.

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McDonald’s could be facing a European Commission (EU) investigation into its tax affairs.

EU competition commissioner Margrethe Vestager said she is looking into trade union allegations that McDonald’s avoided paying more than €1 billion ($1.1 billion) in corporate taxes between 2009 and 2013.

Unions claim McDonald’s diverted nearly €4 billion of revenues into a Luxembourg subsidiary staffed by 13 people.

McDonald’s has rejected the claims.

Photo Reuters

Photo Reuters

Margrethe Vestager said her office is “looking into the information gained by trade unions when it comes to McDonald’s in order to assess if there is a case.”

The coalition of European and US unions claims that McDonald’s reduced its tax burden by moving its British headquarters to Switzerland and then channeling money into a Luxembourg-based subsidiary that also had a Swiss branch.

The unions said the Luxembourg offshoot had revenues of €3.7 billion over the five-year period but reported paying €16 million in taxes.

McDonald’s maintains that it has complied fully with EU tax law.

The EU has been cracking down on what it sees as aggressive tax avoidance by multinational companies, last year opening investigations into Apple in Ireland, Starbucks in the Netherlands, and Amazon in Luxembourg.

The newly elected president of the European Commission, Jean-Claude Juncker, has denied allegations he encouraged tax avoidance when he was Luxembourg’s prime minister.

Jean-Claude Juncker, 59, said there was “nothing in my past to indicate that I wanted to encourage tax evasion”.

He has come under pressure over claims that some 340 global companies were granted deals to help them avoid tax during his 18 years in office.

The Commission has begun an investigation.

Jean-Claude Juncker has denied allegations he encouraged tax avoidance when he was Luxembourg's prime minister

Jean-Claude Juncker has denied allegations he encouraged tax avoidance when he was Luxembourg’s prime minister

Jean-Claude Juncker, 59, took over as president of the Commission at the start of November and was confronted within days with a report by investigative journalists that alleged that companies such as Pepsi and Ikea had made deals with his country’s government to save billions in tax in other countries.

Incumbent PM Xavier Bettel was quoted as saying all deals abided by international tax rules, although Jean-Claude Juncker made no comment at the time.

In an unexpected appearance before journalists on November 12, the Commission President repeated the message.

“Everything that has been done has been in compliance with national legislation and international rules that apply in this matter,” he said.

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The European Commission will press Luxembourg over new allegations it offered tax breaks for more than 300 global companies, an EU spokesman says.

Commission chief and ex-Luxembourg PM Jean-Claude Juncker will not handle the probe, Margaritis Schinas said.

Pepsi and Ikea are among those accused of making deals with Luxembourg to save billions in tax in other countries.

The revelations were published in a report by the International Consortium of Investigative Journalists (ICIJ).

Luxembourg is already under investigation by the EU over suspected “sweetheart” tax deals with online retailer Amazon and the financing arm of carmaker Fiat.

Two other member states, Ireland and Malta, are also being investigated as part of the EU’s crackdown on multinationals’ tax avoidance schemes.

Luxembourg PM Xavier Bettel has insisted that the deals abided by international rules on tax, in comments reported by AFP news agency.

The European Commission will press Luxembourg over new allegations it offered tax breaks for more than 300 global companies

The European Commission will press Luxembourg over new allegations it offered tax breaks for more than 300 global companies

The ICIJ said a team of 80 journalists had pored over nearly 28,000 pages of leaked documents showing tax agreements and returns relating to more than 1,000 businesses.

It says the companies created “complicated accounting and legal structures that move profits to low-tax Luxembourg from higher-tax countries where they’re headquartered or do lots of business”.

In some cases, it adds, companies enjoyed tax rates of less than 1% on profits moved into the European duchy.

“The Duchy of Luxembourg has a legitimate government that has to provide answers to the investigation opened by the Commission,” the EU Commission’s spokesman Margaritis Schinas told reporters on November 6.

When pressed repeatedly about Jean-Claude Juncker’s role in the probe, Margaritis Schinas said that EU Competition Commissioner Margrethe Vestager would take charge of the current investigation.

“She will request the appropriate information, enforcing the rules, as is the duty of the European Commission,” he added.

The leaked papers related to some 340 companies, including FedEx, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan, Deutsche Bank.

The deals – which the ICIJ says were legal – were facilitated by the international tax advisory group PricewaterhouseCoopers.

The Guardian, which was one of the media outlets working on the probe, said it painted “a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale”.

Luxembourg was “like a magical fairyland,” the paper quotes former senior US Treasury official Stephen Shay as saying.

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Domenico Dolce and Stefano Gabbana have been sentenced to jail in Italy for one year and eight months for tax evasion.

The Italian fashion designers were accused of hiding millions of euros from tax authorities.

Domenico Dolce and Stefano Gabbana, whose customers have included Madonna, Kate Moss and Kylie Minogue, were not at the trial, deny the charges and have appealed.

Domenico Dolce and Stefano Gabbana have been sentenced to jail in Italy for one year and eight months for tax evasion

Domenico Dolce and Stefano Gabbana have been sentenced to jail in Italy for one year and eight months for tax evasion

The designers have not commented on their sentences, which have been suspended pending their appeal.

The investigation by the Italian authorities began around six years ago as part of a government plan to crack down on tax avoidance.

At the hearing on Wednesday, the judge ruled that the designers moved their brand to a Luxembourg-based holding company Gado – an anagram of their two surnames – in 2004.

He said they had done this to avoid declaring taxes on royalties of around 1 billion euros ($1.3 billion).

Prosecutors alleged they sold the business for well below actual market value.

They were initially cleared of the charges at a previous trial in April 2011 but Italy’s highest court overturned that ruling, ordering that the case should be sent back.

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Apple has been accused by US Senate of being “among America’s largest tax avoiders”.

A Senate committee said Apple had used “a complex web of offshore entities” to avoid paying billions of dollars in US income taxes. But it said there was no indication the firm acted illegally.

Apple chief Tim Cook will go before the panel on Tuesday. In prepared testimony Apple said it did not use tax gimmicks.

The Irish Republic, home to three Apple subsidiaries, says it is not to blame for the firm’s low tax payments.

The US Senate had said that Apple paid little or nothing on billions of dollars in profits placed in Irish subsidiaries.

“They are not issues that arise from the Irish taxation system,” Deputy Prime Minister Eamon Gilmore told national broadcaster RTE when asked about the Senate committee report.

“They are issues that arise from the taxation systems in other jurisdictions and that is an issue that has to be addressed first of all in those jurisdictions.”

Apple has a cash stockpile of $145 billion, but the Senate committee said $102 billion of this was held offshore.

The company says it is one of the largest taxpayers in the US, having paid $6 billion in federal corporate income tax in the 2012 fiscal year.

The Senate Permanent Subcommittee on Investigations has been examining “methods employed by multinational corporations to shift profits offshore”.

Some large firms in the US have come under fire for their reluctance to repatriate their foreign earnings as they could face a top tax rate of 35%.

US corporation tax is one of the highest in the world at 35%. However, companies typically pay far less, thanks to numerous deductions and exemptions.

In its report into Apple, committee chairman Carl Levin said: “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven.

“Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.”

Apple has been accused by US Senate of being among America's largest tax avoiders

Apple has been accused by US Senate of being among America’s largest tax avoiders

Committee member John McCain said: “Apple claims to be the largest US corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.”

Apple said in its statement: “Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax.

“It does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands.”

It added that it had “substantial” foreign cash because it sells the majority of its products outside the US, and these foreign earnings were taxed in the jurisdictions where they were earned.

The committee has already questioned tech giants Microsoft and Hewlett-Packard over their tax practices.

In September, the committee accused the two firms of using places such as the Cayman Islands, so they do not have to pay US taxes, saying their methods ranged from “egregious to dubious validity”. Both companies deny any wrongdoing.

Five of the top 10 companies with the biggest offshore cash balances are in the technology sector.

Apple said it wanted to see legislation that “dramatically simplifies” the US corporate tax system.

It believes reform should be “revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates, and implement a reasonable tax on foreign earnings that allows free movement of capital back to the US”.

Apple said that, though these changes may increase its own taxes, it would not be opposed to such a result “if it occurs in the context of an overall improvement in efficiency, flexibility and competitiveness”.

The company said the changes would stimulate job creation in the US, increase domestic investment and promote economic growth.

Apple drew criticism three weeks ago when it sold $17 billion in bonds to raise cash to fund payouts to shareholders, rather than repatriating some of its cash reserves, which would be taxed in the US.

The move saved the company an estimated $9.2 billion in taxes.

In its prepared testimony, Apple said that the move was in its shareholders’ best interests.

While critics argue that companies shifting their profits overseas is a huge tax avoidance scheme, others want lower rates to encourage firms to invest in the US.

Last week Cisco chief executive John Chambers said his company was likely to invest more overseas if US tax laws were not modified.

“I prefer to have the majority of my employees here in America. That’s the right decision for us, but if we can’t bring our cash back, we’re going to grow dramatically faster overseas in terms of job placements,” he told CNBC.

“I think this is something our country has to fix.”

The US is not the only country trying to ensure companies pay their “fair share” of taxes.

UK Prime Minister David Cameron has called for countries to work together to clamp down on tax avoidance.

In the UK, Google, Starbucks and Amazon are among several large companies to face criticism over the amount of corporation tax they pay.

Despite making sales of hundreds of millions of pounds, they reported small profits or even losses in the UK after shifting their earnings to overseas operations.

The row led coffee chain Starbucks to agree to pay more UK corporation tax.

On Sunday, Google’s executive chairman Eric Schmidt defended his company, saying it had “always aspired to do the right thing”, but added that “international tax law could almost certainly benefit from reform”.

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Elton John is suing The Times for libel over articles he says falsely linked him to immoral tax avoidance.

In two articles by-lined “the secrets of tax avoiders”, the Times stated Patrick McKenna of Ingenious Media was Elton John’s former accountant.

Papers filed at the High Court said the article implied Elton John had been advised to engage in tax avoidance.

The Times has already published a correction, acknowledging that Patrick McKenna had never been the star’s accountant.

Elton John is suing The Times for libel over articles he says falsely linked him to immoral tax avoidance

Elton John is suing The Times for libel over articles he says falsely linked him to immoral tax avoidance

However, Elton John’s lawyers described the correction, published on 22 June, as “wholly inadequate”.

They said the four-line apology did not have equal prominence to the original articles, which appeared on pages one and six of the newspaper, adding that it “deliberately ignored the defamatory impact” of the original article.

William McCormick QC stated in Elton John’s writ that the pop star was concerned about the effect of the Times articles on his charity work.

“The allegations are particularly damaging to the claimant’s reputation in the sphere of charity fundraising,” he said.

Elton John’s lawyers said the articles caused their client “severe damage to his reputation and personal distress and embarrassment” and they would be seeking damages for “the sense of insult and injury”.

In the original articles, published on 21 June, The Times had discussed the use of film finance partnerships arranged by Ingenious Media, where Patrick McKenna is CEO.

But last month, The Times issued a clarification: “We have been asked to make clear that the film finance partnerships arranged by Ingenious Media, whose CEO is Patrick McKenna, do not offer schemes of this type and they have not been involved in moving money offshore to avoid tax.

“It was not our intention to make such an allegation and we are happy to make the position clear.”

The Times and Elton John were not available for comment at the time of writing.

 

A major study has found that global super-rich elite had at least $21 trillion hidden in secret tax havens by the end of 2010.

The figure is equivalent to the size of the US and Japanese economies combined.

The Price of Offshore Revisited was written by James Henry, a former chief economist at the consultancy McKinsey, for by the Tax Justice Network.

James Henry said his $21trillion is actually a conservative figure and the true scale could be $32 trillion. A trillion is 1,000 billion.

He used data from the Bank of International Settlements, International Monetary Fund, World Bank, and national governments.

James Henry’s study deals only with financial wealth deposited in bank and investment accounts, and not other assets such as property and yachts.

A major study has found that global super-rich elite had at least $21 trillion hidden in secret tax havens by the end of 2010

A major study has found that global super-rich elite had at least $21 trillion hidden in secret tax havens by the end of 2010

The report comes amid growing public and political concern about tax avoidance and evasion. Some authorities, including in Germany, have even paid for information on alleged tax evaders stolen from banks.

The group that commissioned the report, Tax Justice Network, campaigns against tax havens.

James Henry said that the super-rich move money around the globe through an “industrious bevy of professional enablers in private banking, legal, accounting and investment industries.

“The lost tax revenues implied by our estimates is huge. It is large enough to make a significant difference to the finances of many countries.

“From another angle, this study is really good news. The world has just located a huge pile of financial wealth that might be called upon to contribute to the solution of our most pressing global problems,” he said.

The report highlights the impact on the balance sheets of 139 developing countries of money held in tax havens that is put beyond the reach of local tax authorities.

James Henry estimates that since the 1970s, the richest citizens of these 139 countries had amassed $7.3 trillion to $9.3 trillion of “unrecorded offshore wealth” by 2010.

Private wealth held offshore represents “a huge black hole in the world economy,” James Henry said.

Other findings in James Henry’s report include:

• At the end of 2010, the 50 leading private banks alone collectively managed more than $12.1 trillion in cross-border invested assets for private clients

• The three private banks handling the most assets offshore are UBS, Credit Suisse and Goldman Sachs

• Less than 100,000 people worldwide own about $9.8 trillion of the wealth held offshore.

James Henry said it was difficult to detail hidden assets in some individual countries because of restrictions on getting access to data.