Source: ICIJ
Deloitte, for example, employs roughly 150 people in the tiny English Channel islands of Jersey and Guernsey, two of the world’s busiest offshore havens.
Confidential documents obtained through ICIJ’s “Offshore Leaks” investigation show that Big 4 firms had a close relationship with Portcullis TrustNet, a Singapore-based offshore services firm that sets up hard-to-trace offshore companies for clients around the world. PwC, for example, helped incorporate more than 400 offshore entities through TrustNet for clients from mainland China, Hong Kong and Taiwan, the records show.
Another stash of confidential documents reviewed by ICIJ show that between 2002 and 2010 PwC helped hundreds of global companies obtain confidential tax deals from authorities in Luxembourg, allowing Amazon, Abbot Laboratories and others to book profits in the tiny European duchy and shrink their taxes at the expense of national treasuries around the world.
The documents reveal, for example, that PwC helped three major Latin American banks use Luxembourg’s accommodating tax regime to claim write offs for “intangible assets” that allowed them to sidestep nearly €70 million in taxes between them in Brazil, an analysis by ICIJ’s reporting partner, Brazilian daily Folha de S.Paulo, calculated.
Luxembourg’s tax deals are legal in Luxembourg, but may be subject to challenges by tax authorities in other countries who view them as allowing companies to avoid paying their fair share of taxes.
U.S. Tax Court cases show that big accounting firms are aware that the offshore profit-shifting and tax-savings arrangements they create can be at risk of being labeled as illegal by courts or tax authorities.
In one instance documented by a U.S. Senate investigation, a senior KPMG professional urged the firm to ignore IRS rules on registering tax shelters. He “coldly calculated,” a Senate report said, that the penalties for violating the law would be no greater than $14,000 per $100,000 in fees that KMPG would collect.
“For example,” he wrote, “our average … deal would result in KPMG fees of $360,000 with a maximum penalty exposure of only $31,000.”