Major asset owners and fund managers feature in Luxembourg tax leak documents

Leading asset owners including Australia’s Future Fund and Canada’s Public Sector Investments Board (PSPIB) as well as major fund management firms have been named in leaked documents about complex offshore tax arrangements in Luxembourg.

The documents have been published by the International Consortium of Investigative Journalists and it is stressed that there are no accusations of illegal action.
The A$104.5bn (€72.4bn) Future Fund, according to the documents, used accounting firm PwC to negotiate the tax deals in the Grand Duchy. It used a complex structure involving interest-free loans via subsidiaries in the Cayman Islands and Luxembourg.

The Australian Financial Review quoted Future Fund Managing Director David Neal as saying the structure was “commonly used by institutional investors and external investment managers”.

The PSPIB, the C$94bn (€66.3bn) fund for the Royal Canadian Mounted Police and other civil servants that is a signatory to the Principles for Responsible Investment (PRI), in the words of the Wall Street Journal, “used a complex series of shell companies” in Luxembourg to avoid paying taxes on a large German property deal in 2008. Canada’s CBC News said PSP Investments’ spokesman Mark Boutet acknowledged the fund used the arrangement, and quoted him as saying it was “communicated to the German tax authorities and no issue was raised.”

“Before German legislators changed the law, this approach was used by other investors and was consistent with German case law,” Boutet told CBC. He disagreed with a characterization that it was “aggressive tax avoidance”.

The report quoted Tony Clement, President of the Canadian government’s Treasury Board oversight body, as saying in a statement: “PSP Investments operates at arm’s length from the federal government. It is not part of the federal public administration, and its business and affairs are managed by a board of directors.”For its part, PwC said the reports are “based on partial, incomplete information dating back four years or more, which was illegally obtained”. It added that all its advice “is given in accordance with applicable local, European and international tax laws and agreements”.

The revelations about the Future Fund and other Australian firms have prompted the Greens in Australia to say that they will push for directors of low tax paying companies to give personal evidence direct to Parliament. Party leader Christine Milne said: “For too long, loopholes and complex legal webs have allowed the tax burden to be shifted from multi-billion dollar corporations straight back to everyday Australians. It is unethical and outrageous.”

“The Greens will be pushing for directors of companies with fiduciary responsibility to be brought before the Senate inquiry and held accountable to the Australian Parliament and the Australian people.” It comes as tax is set to be a major topic at the G20 Leaders Meeting in Brisbane on November 15-16.

The European Union is already investigating whether Luxembourg’s deals with internet giant Amazon and the financial arm of Italian car firm Fiat amount to illegal state aid and the latest news is an embarrassment for new European Commission President Jean-Claude Juncker, who led Luxembourg as either finance minister or prime minister since 1989. “This must however be a watershed moment to galvanise the fight against tax evasion and dumping in Europe and beyond,” said Sven Giegold, of the Green Party in the European Parliament. “The Commission must now set out a comprehensive action plan against tax dumping.”

Finance firms named in the documents (selected): AMP Capital Investors, ABN AMRO, Aviva, AXA Group, Abu Dhabi Investment Authority, Doughty Hanson, Threadneedle, Fidelity, Friends Provident, the Future Fund, Caisse d’Epargne, Hg Capital, Henderson, McGraw-Hill, Prudential of the UK, Public Sector Pensions Investments Board, Schroders, SEB, State Street.