The Grand Duchy of Luxembourg is one of the world’s financial epicenters, because it follows the business model adopted by many small countries: Create tax structures that allow multinational companies to avoid onerous levies applied in wealthier countries.
The Grand Duchy of Luxembourg is one of the world’s financial epicenters, because it follows the business model adopted by many small countries: Create tax structures that allow multinational companies to avoid onerous levies applied in wealthier countries.
Until recently, a lot of Luxembourg’s confidential corporate tax arrangements came down to one man, Marius Kohl, who as head of the government agency Sociétés 6 garnered respect for his business-friendly brand of government bureaucracy, and for his role in helping to secure €1.2 billion in annual tax revenue for a country of 550,000 people. The Wall Street Journal recently scored the first interview ever (paywall) with Kohl, who retired from his job last year. (He was replaced by a six-person board that can no longer issue oral rulings as Kohl did.) Here’s what the interview revealed about Kohl and his work:
He apparently had the sole authority to approve corporate tax agreements in the Grand Duchy, telling the Journal that “sometimes it’s easier if you only have to ask one person.” Sure!
Now, it takes six months to push a deal through.
The standard for international dealings between subsidiaries of the same company is that they must act as though they were independent, or “arm’s length” apart. Asked how he checked that standard, Kohl “licked his thumb and held it up in the air.”
One of them, former Luxembourg finance minister Jean-Claude Juncker, is now the president of the European Commission—which recently went after Ireland for setting up favorable tax deals with Apple $AAPL without any real documentation and is investigating a deal that Luxembourg approved with Amazon $AMZN during Kohl’s tenure.
Per the Journal:
[Office] decor was modest except for a Pirelli calendar—a gesture of gratitude, he says, from the tire company for his help in navigating the tax system. The limited-edition calendars, featuring suggestive pictures of famous models by star photographers, are a status symbol, sent to a select group including celebrities and corporate leaders.
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