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29th Mar 2020

Multinationals deny wrongdoing in EP tax hearing

  • Google came to the European Parliament to explain 'the Bermuda situation' - subsidiary used to park money before investing it. (Photo: Teachandlearn)

'We just follow the rules, and by the way, we actually pay a lot of tax.'

This is more or less how one can summarize each of the 11 testimonies made by multinational companies that showed up for a hearing in the European Parliament on Monday (16 November).

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Representatives of global corporations like Coca Cola, McDonald's, Google, and Facebook, were present in the last hearing of the EP's special tax committee, which was set up after last year's revelations, also known as Luxleaks.

The Luxleaks scandal involved leaked documents showing that over 300 multinational companies had private tax arrangements - tax rulings - with Luxembourg.

The EP committee, which adopted its report in October, was marred by lack of cooperation from several EU member states and companies. Only four multinationals agreed to appear before the committee during the summer.

All of those present at Monday's hearing - Google, Facebook, Amazon, HSBC Bank, Barclays, Philip Morris International, Ikea, Coca-Cola, Walt Disney, McDonald's, and Anheuser-Busch InBev - had previously declined to participate.

Some apologised for not showing up at previous meetings, but others were more direct.

“We didn't find it relevant to attend this meeting at that point,” said Ikea's Krister Mattsson, head of corporate finance.

According to the committee's chair, French centre-right MEP Alain Lamassoure, their presence “shows that not even the most powerful can allow themselves not to cooperate with the European Parliament."

But actually, the five-hour hearing turned out to be a disappointment for several of the critical MEPs.

“You did not answer my question,” could be heard from several of the parliament's speakers.

Left-wing German MEP Fabio de Masi for example, wanted to know if the companies pay tax advisers a fee that is proportional to the amount of tax that was avoided.

But Google's senior director of public policy and government relations, Nicklas Lundblad, did not answer the question. Instead, he stated in general terms that it is “good practice to use advisers” to make sure Google complies with local tax laws.

Even when pressed to ask De Masi's question, Lundblad simply ignored the question and said only what he had apparently wanted to say.

Google was also asked why it has a subsidiary company in Bermuda.

In his answer about “the Bermuda situation," Lundblad said that the Bermuda subsidiary is used to temporarily park money before investing it, instead of receiving it as profit in the United States and be forced to pay corporate tax over it.

“It defers only US tax. So it does not actually affect any tax paid in the EU,” said Lundblad.

Facebook's Delphine Reyre made a similar argument about the fact that Facebook has a subsidiary in the Cayman Islands.

“Taxes are deferred as regards the United States, and which don't affect at all the countries in Europe apart from Ireland. And as regards to Ireland, we are in total complicance with Irish law as it stands today.”

Strikingly, Reyre, director of public policy Southern Europe at Facebook, started her introduction saying: “I'm no tax expert."

Many of the companies also listed the amount of tax that they have paid, saying for example “McDonald's pays significant amount of corporate tax across Europe."

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